The Treasury market took a breather yesterday as participants found little trading impetus in the day's economic reports.

Short-dated securities ended slightly higher while long-dated paper closed unchanged, with the 30-year bond yielding 6.28%.

Adding to the illiquid environment is the fact that many accounts have already closed their books for the year and are not willing to place new bets on the market.

Long-dated Treasuries held steady amid worries about stronger growth in the economy and upcoming supply. The short end of the market drifted higher as dealers moved in on the yield curve to avoid volatility in the longer maturities. Municipal defeasance also bolstered the short end of the market, and to a lesser degree, the intermediate sector of the curve.

Participants said the trend is likely to remain until players get a better read on investors' appetite for new supply. That should come next week, when the Treasury Department is scheduled to sell $17 billion in two-year notes and $11 billion in five-year notes.

"The market's near-term outlook depends on how the auctions fare," said Tony Crescenzi, head fixed-income trader at Miller, Tabak, Hirsch & Co. "People want to see how well the market can absorb supply in an environment where the economy is improving and the market fears higher inflation."

Economic statistics released yesterday confirmed that the manufacturing sector continues to be an engine of growth in the economy. The reports also supported the view that 1992 will end on solid footing, with gross domestic product growth of 4.0% or more, analysis said.

One report released shows that production by the nation's manufacturers jumped 0.9% in November, the biggest one-month gain of the year. The Federal Reserve reported that the increase was led by sharp increases in the motor vehicles and parts industry and followed a revised gain of 0.7% in October, previously reported as a 0.8% increase. Year-over-year industrial production rose 4.4%.

Another release came from the Commerce Department. It showed that U.S. business inventories remained unchanged in October at a seasonally adjusted $867.63 billion. The October rate followed a revised rise of 0.2% in September.

"The numbers didn't tell us anything about the economy we didn't already know," said Samuel Kahan, chief economist at Fuji Securities Inc. "There is forward momentum in the economy and we've known that for a while."

Supporting that view was a study release yesterday by the UCLA Business Forecasting Project that paints an optimistic outlook for the U.S. economy. The quarterly report by the Anderson Graduate School of Management has been revised upward from its September predictions. The group now expects gross domestic product to rise 3.7% in 1994 and 3.6% in 1995.

The short-term national outlook for 1994 to 1997 calls for decreased oil prices, low interest rates, recovering corporate profits, and strong investment gains.

The 10-year outlook foresees a strong investment picture, moderate inflation, and interest rates stable at well below double-digit levels. Residential investmen will recover for the next five years and remain stable for the following five, UCLA economists said.

In the futures market yesterday, the March bond contract ended down 5/32 to 115.19.

In the cash markets, the 4 1/4% two-year note was quoted late yesterday up 3/32 at 100.03-100.04 to yield 4.18%, the 5 1/8% five-year note ended up 2/32 at 99.25-99.27 to yield 5.16%, the 5 3/4% 10-year note was unchanged at 99.18-99.22 to yield 5.79%, and the 6 1/4% 30-year bond was also unchanged at 99.13-99.17 to yield 6.28%.Treasury Market Yields Prev. Prev. Wednesday Week Month3-Month Bill 3.08 3.12 3.096-Month Bill 3.31 3.34 3.231-Year Bill 3.59 3.54 3.422-Year Note 4.18 4.15 4.053-Year Note 4.52 4.45 4.405-Year Note 5.16 5.07 4.987-Year Note 5.32 5.21 5.1710-Year Note 5.79 5.66 5.6230-Year Bond 6.28 6.15 6.18 Source: Cantor, Fitzgerald/Telerate

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