Treasury note prices ended a little lower yesterday after a quiet session spent waiting for the economic reports that will arrive today and tomorrow.

Late in the afternoon, note prices were down about 1/8 point, while the 30-year bond was unchanged and yielded 7.43%.

Traders said flows were thin and securities remained in narrow price ranges.

"Generally activity was light," said Stephen Gallagher, an economist at Kidder, Peabody & Co. "The bond was down a little in the morning and it recovered late in the morning."

He said the short end's weakness was just a reversal of the gains in that sector over the last three trading sessions.

"Twos and fives had three days of being fairly strong, since last Friday," he said.

A bond salesman said he thought the long bond's firmer tone was partly due to the talk the Clinton administration will shift issuance from the long end to the short end.

The inflation news today and tomorrow is also expected to be favorable. Economists expect a scant 0.1% rise in the November producer price index to be released this morning, and a 0.2% increase in tomorrow's November consumer price report.

Bond traders are also keeping an eye on commodity prices, which have also been softening in recent days. Yesterday the Commodity Research Bureau closed .33 lower, at 201.48, after falling 1.23 yesterday.

"Everything's extremely optimistic on the inflation front," the salesman said.

Meanwhile, the short end will be hit with supply in the coming weeks, including $14.75 billion of year bills today and the two-year and five-year auctions a couple of weeks down the road.

The bond market did not react to yesterday's only economic news, the Federal Reserve's "beige book."

The beige book, a compilation of economic updates from the district Fed banks, says the economy was improving modestly, but unevenly. The report notes retail activity was increasing and retailers were optimistic about the holiday season.

The report "confirmed a lot of the information we have had recently," Gallagher said.

The March bond futures contract closed unchanged at 104 6/32.

In the cash market, the 7 5/8% 30-year bond was also unchanged, at 102 5/32-102 9/32, to yield 7.43%.

The 6 3/8% 10-year note fell 5/32, to 97 10/32-97 14/32, to yield 6.73%.

The three-year 5 1/8% note was down 3/32, at 99 30/32-100, to yield 5.12%.

Rates on Treasury bills were mixed, with the three-month bill down two basis points at 3.24%, the six-month bill up two basis points at 3.35%, and the year bill three basis points higher at 3.52%.

Merrill Lynch's Outlook

Economists at Merrill Lynch & Co. said yesterday they expect the economy to expand at an unexciting 2.5% to 3% rate in 1993.

"Signs of an economic recovery are multiplying," but growth will be subdued compared to the gains seen in past recoveries, said Bruce Steinberg, Merrill's manager of macroeconomic analysis, at the company's annual economic forecast news conference.

Steinberg said the strongest contribution to growth would come from business equipment spending, and especially purchases of technology, thanks to the prospect of an investment tax credit.

Consumer spending will improve along with the rest of the economy, but high consumer debt loads will cap gains in spending, and the weakness in Europe and Japan will slow U.S. exports, Steinberg said.

He said the Fed is through easing monetary policy, but probably will not begin to tighten until at least midway through next year. The steady Fed policy will allow short-term rates to remain low.

At the long end, Merrill Lynch expects the 30-year Treasury bond to trade between 7.50% and 8% during 1993, as investors key off the inflation news and President-elect Bill Clinton's economic proposals.

Martin Mauro, the firm's senior economist, said the demand for credit is not likely to increase much, given the moderate growth rate, and that means interest rates should not rise much.

Mauro expects corporate and municipal bonds to outperform the Treasury market next year. He recommended investors look at the two- to five-year sector in the Treasury market, and long-term, high-quality municipal bonds.

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