Market drops on profit taking as market awaits new numbers.

Fears of souring inflation combined with profit taking Friday to drive the market lower, despite what appeared to be a favorable inflation report.

The long bond finished Friday down 18/32 point, to yield 7.28%.

Much of the action came right at the start of the New York session, when the Labor Department reported the producer price index for finished goods inched up just 0.1% in August, following advances of 0.1% in July and 0.2% in June.

The core rate fell 0.1% for the month after a 0.2% increase in July. The market expected a 0.2% rise in the index and a similar one in the core, so prices jumped higher in response to the better than expected announcement.

But profit takers jumped in immediately, leaving the market unable to support higher levels.

And on closer examination, traders saw cause for concern in the underlying components of the producer price index. A 5.6% drop in tobacco prices was responsible for a big chunk of the cortranche consisted of $300 million of 8% guaranteed debentures due 2022. The noncallable debentures were priced at 99.50 to yield 8.044% or 77 basis points over comparable Treasuries.

Moody's Investors Service rates the offering A2, while Standard & Poor's Corp. rates it A. Morgan Stanley & Co. served as co-manager.

Including Grand Metropolitan's deal, approximately $1.5 billion of fresh debt arrived Friday. Through last Thursday, Securities Data Co. lists 44 new deals totaling $7.9 billion.

The Newark, N.J.-based firm shows 15 deals priced on Tuesday totaling $2.6 billion, 16 on Wednesday totaling $3.5 billion, and 13 on Thursday totaling $1.7 billion.

Securities Data's total through Thursday combined with Friday's deals would bring last week's total to about $9.4 billion.

Elsewhere, the News Corporation Ltd. Friday filed a registration statement with the Securities and Exchange Commission for a $1 billion senior debt offering, a spokeswoman for the company said.

The company also filed for a global equity offering of 40 million ordinary shares including 18 million ordinary shares represented by American depositary shares to be offered in the United States and Canada.

News Corp. plans to use all proceeds to repay bank debt.

The senior debt offering will consist

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