Treasury yields fall across spectrum in thin trading session.

The U.S. Treasury bond market yesterday failed to sustain gains made earlier in the week as prices slumped for all maturities and the benchmark 30-year bond slid almost a full point.

By the close of trading, the long bond had fallen 3 1/32 to yield 7.535%. Traders and market analysts attributed the sharp decline to a variety of factors, including profit-taking and a slim trading volume that often exaggerates price movements.

"Although there hasn't been much trading, there was a snowball effect after a decent round of profit-taking," one analyst said yesterday afternoon. "I don't think you can read too much into today's action."

But others said that yesterday's market may foreshadow problems ahead. Rumors circulated that a revision of growth in second-quarter gross domestic product, due out today, will surpass the 4.2% consensus prediction, throwing further downward pressure on the long bond.

In addition, several traders said the market continues to exhibit many bearish characteristics, such as lack of staying power following gains made on Tuesday and Wednesday. They pointed to the inability of the market to sustain Wednesday's upward price action, which saw the 30-year bond rise almost one point to yield 7.45% following a successful five-year note auction.

"[Wednesday's action] proves that the market can't hold higher levels," said James Kenney, trading manager at Prudential Securities. "Every time we go much below 7.50%, we go right above it."

William V. Sullivan, director of money market research at Dean Witter Reynolds, also pointed out that the long bond has a difficult time trading substantially below a 7.50%. But Sullivan doesn't believe that the way the long .bond is trading now is inconsistent with a broad yield range of 7.25% to 7.75%, which has been established during the past three months.

Sullivan said he expects the trading range to lafgely continue until the economy produces decisive evidence that it is heading toward recovery, or falling backward. "There's just not enough evidence on the economy," Sullivan said.

Underscoring Sullivan's point were two reports that traders said had a minimal impact on prices. The Labor Department reported that initial state unemployment claims fell 3,000 to a seasonally adjusted 322,000 in the week that ended Aug. 20.

In addition, existing home sales fell 0.3% in July to a seasonally adjusted annual rate of 3.95 million, the National Association of Realtors said. The group said most of the slump occurred in the Northeast and South.

In the corporate bond market, traders also reported listless activity, with prices largely mirroring movements in the Treasury market. Prices of highyield securities fell about 1/2 point.

On the new-issue front, Morgan Stanley Group issued $200 million of notes, due Sept. 1, 1999, using its own underwriting desk. Morgan placed a 7.50% coupon on the notes, pricing the securities at 99.893 to yield 7.526%.

The issue is noncallable for life, and the firm expects to earn an A1 rating from Moody's Investors Service and an A-plus from Standard & Poor's Corp.

CS First Boston priced $1.22 billion of student loan asset-backed securities for Banc One Corp First Boston priced the global issue in three parts; $81 million in Class A-1 floating-rate notes; $1.1 billion in Class A-2 floating-rate notes; and $43 million in Class B subordinate floating-rate notes.

The Class A-1 floating-ate notes were priced at par with a coupon that floats 7.5 basis points above the onemonth London interbank offered rate, while the Class A-2 floating-rate notes were priced at par with a coupon that floats 30 basis points above one-month Libor. The $43 million of Class B subordinate floating-rate notes was priced at par.

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