Unemployment hit an eight-year high in June, triggering a discount rate cut that sent corporate bonds prices soaring and shook issuers from their usual pre-holiday inertia.

Issuance totaled about $845 million yesterday.

"It was a decent amount of issuance," one syndicate desk member said, adding, however, that, "It wasn't a ton."

Issuance should prove brisk this week, but probably will not surpass January's record levels, he said.

News that June unemployment rose to 7.8% from 7.5% apparently spurred the Federal Reserve to cut the discount rate to 3% form 3.5%. U.S. nonfarm payrolls in June fell 117,000, well below the expected increase of 90,000.

Treasuries rallied sharply, with the 30-year bellwether bond up about 1 1/2 points to yield 7.62%. High-grade corporates for the most part followed suit.

While the new-issue market proved active compared to most pre-holiday sessions, issuance would have been heavier absent the impending three-day weekend, one expert said.

"If it was a normal employment release day and we'd had this event, we'd still be running," Mike Bassett, a vice president at Princeton, N.J.-based Stone & McCarthy Research Associates Inc., said.

"And that just means next week is all the busier," he said.

As for the high-yield sector, interest-sensitive issues gained between 1/4 to 1/2 point after the discount rate cut, while distressed names finished unchanged to slightly weaker due to lack of interest.

Asked about market activity, one trader replied, "You woke me up."

New Issues

Fleet Financial issued $200 million of 5.625% to yield 5.73%, or 70 basis points over comparable Treasuries. Moody's Investors Service rates the offering Baa2, while Standard & Poor's Corp. rates it BBB-plus. Merrill Lynch & Co. lead managed the offering.

Suntrust Banks issued $200 million of 7.375% notes due 2002. The noncallable notes were priced at 99.62% to yield 7.429%, or 50 basis points over comparable Treasuries. Moody's rates the offering A1, while Standard & Poor's rates it A-plus. Lehman Brothers lead managed the offering.

American General Finance issued $150 million of 7.45% notes due 2002. The noncallable notes were priced at 99.78 to yield 7.481% or 55 basis points over comparable Treasuries. Moody's rates the offering A1, while Standard & Poor's rates it A-plus. Goldman, Sachs & Co. managed the offering.

K-Mart issued $100 million of 8.375% debentures due 2002. Noncallable for 10 years, the debentures were priced at 99.45 to yield 8.425%, or 78 basis points over comparable Treasuries. Moody's rates the offering A1, while Standard & Poor's rates it A. Morgan Stanley & Co. lead managed the offering.

Duquesne Light Co. issued $100 million of 8.375% first collateral trust bonds due 2024. Noncallable for five years, the bonds were priced at 98.613 to yield 8.50% or 85 basis points over comparable Treasuries. Moody's rates the offering Baal, while Standard & Poor's rates it BBB-plus. Goldman Sachs managed the offering.

OPI International Inc. issued $70 million of 12.875% guaranteed senior notes due 2002. The bonds were priced at 99.375 to yield 12.99%. They are callable after five years at 106.4, moving to paper in 2000. Offshore Pipelines Inc. guarantees the bonds. Bear, Stearns & Co. managed the offering. Moody's rates the offering B1, while Standard & Poor's rates it B.

Federal Farm Credit Banks issued $25 million of 6.20% medium-term notes due 1997 at par. Noncallable for a year, the notes were priced to yield 15 basis points over comparable Treasuries. Goldman Sachs sole managed the offering.

Thursday's Ratings

Moody's lowered Aetna Life and Casualty Co.'s senior debt rating to A1 from Aa3 as part of its ongoing review of the life insurance industry's real estate exposure. The rating agency also downgraded the insurance financial strength ratings of its principal subsidiaries, a Moody's release says.

"The rating changes reflect Aetna's large mortgage portfolio, which, as a consequence of the ongoing deterioration of the commercial real estate markets, is expected to affect the company's earnings and capital formation," the release says.

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