The Treasury auctioned $11 billion if five-year notes on Wednesday at a higher-than-expected average yield of 5.23%.

The day before, traders had predicted a yield of 5.21%.

Market analysts attributed the higher rate and a fall in the short end of the government bond market to an article in Wednesday's New York Times reporting that the Federal Reserve may tighten credit during the summer.

"The article suggested that inflation is still a problem and investors get nervous when you start talking about inflation," said Steve Wood, money market economist for BankAmerica Corp.

2.63 Bids for Each Offer

At the auction, bids exceeded accepted offers by a ratio of 2.63 to 1. This was much less than the 3.11 bid-cover ratio at the previous auction of five-year notes.

But the demand shown on Wednesday was still greater than the average for the past several five-year-note sales.

"Considering the setting, it was a good auction," said Astrid Adolfson, an economist at MCM Money Watch. "Given the change in psychology between today and yesterday, the fact that the rate is only 2 basis points higher than expected is surprising."

Ms. Adolfson doubts a tightening is in the offing, as the article suggested.

And economic data released on Wednesday supported her point of view.

Durables Orders Down

The Commerce Department reported that durable-goods orders, expected to have grown 1% or more in May, actually declined 1.6% that month.

In addition, the government revised downward gross domestic product growth for the first quarter to 0.7% from an earlier estimate of 0.9%. The economy grew at a much faster 4.7% in the fourth quarter of 1992.

The yield on the 30-year bond fell to 6.76% from 6.77%. But shorter-term rates moved up. The bond-equivalent yield on three-month bills rose to 3.19% from 3.14%. Two-year notes yielded 4.19%, up from 4.10%.

The weak economic data hurt stocks and the dollar. The Dow Jones industrial average finished 30.72 points lower, at 3,466.81. The dollar closed in New York at 1.6907 German marks and 108..95 yen, down from 1.6956 and 110.85.

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