Treasury prices traded quietly within narrow ranges yesterday as participants waited to hear President Bush's acceptance speech tonight.

After posting small losses for most of the day, long-term prices managed to close with small gains, based in part on a wire service report that said the President will not propose major tax cuts in his speech.

Late yesterday, most Treasury notes and bonds were posting slight gains, and the 30-year bond was up 1/8 point to yield 7.31%.

Ever since White House Chief of Staff James Baker mentioned making lower tax rates a part of the Republican campaign strategy last week, Treasury traders have worried the presidential candidates might promise all sorts of tax cuts and programs to attract voters, to the detriment of the budget deficit.

For most of the day yesterday, activity was minimal, and traders said participants wanted to hear what Mr. Bush had to say about taxes before making any decisions.

Prices improved slightly late in the day when the Dow Jones News Service carried an Associated Press story that White House spokesman Marlin Fitzwater said the President would not call for "sweeping tax cuts" in the speech.

A bond trader said Mr. Fitzwater's reassurance removed the biggest barrier to higher Treasury prices.

The trader said the Treasury market could still be hurt if the President makes a lackluster speech that seems to bolster the chances of Democratic candidate Bill Clinton.

"You have two things steepening the curve, a Clinton presidency and a Bush presidency," the bond salesman said.

Long-term securities traded at a loss for most of the session yesterday, weighed down by concerns about fiscal policy, a healthy bounce in June exports, and dealer's continuing efforts to distribute the bonds sold at last week's refunding.

The June merchandise trade deficit declined 7.7% to $6.6 billion from the $7.1 billion May gap. The May figure was revised from the $7.38 deficit reported last month.

The consensus forecast called for a $6.99 billion June deficit.

Kathleen Camilli, chief economist at Ramirez Capital Consultants, said the long end reacted negatively to the news that exports had risen 7.2% to $38.3 billion.

"The report was definitely in line with expectations, but the market saw the 7.2% increase in exports and people sold the long end," she said.

Analysts said, though, that the increase in exports was less impressive that it seemed because much of the gain was in aircraft.

"What one would like to see is a broad-based rise in exports and that we're not getting because most of our major trading partners are in slumps of their own," said Cynthia Latta, a financial economist at DRI/McGraw-Hill.

After sitting quietly near the lows for most of the day, Treasury prices began to improve yesterday afternoon when the Treasury announced next week's two-year and five-year auctions.

Not only were the issue sizes -- $15 billion of two-years and $10.5 billion of five-years -- in line with expectations, but the Treasury announced a new five-year note instead of reopening the issue sold last month. Traders had talked about a possible reopening because the current five-year's popularity has made it very expensive to borrow in the repurchase market.

The fact that the current fives were not reopened refueled demand for that issue, and boosted other short-term issues as well, the bond salesman said.

The salesman said the late-day slide in U.S. stocks encouraged short-covering at the long end because it renewed worries about the Japanese stock market.

And once the long end improved a little, the bond futures contract broke through a key technical level, which triggered more short-covering and even some new buying by technical traders, the bond trader said.

The September bond futures contract closed 2/32 higher at 106 3/32.

In the cash market, the 7 1/4% 30-year bond was 5/32 higher, at 99 4/32-99 8/32, to yield 7.31%.

The 6 3/8% 10-year note rose 1/8, to 99 10/32-99 14/32, to yield 6.45%.

The three-year 4 5/8% note was up 2/32, at 100 7/32-100 9/32, to yield 4.51%.

In when-issued trading, the two-year note to be sold next Tuesday was yielding 4.07% and the five-year note to be auctioned next Wednesday was bid at 5.45%.

Rates on Treasury bills were little changed, with the three-month bill steady at 3.08%, the six-month bill unchanged at 3.14%, and the year bill one basis point higher at 3.23%. Prev. Prev. Wednesday Week Month3-Month Bill 3.12 3.16 3.216-Month Bill 3.21 3.28 3.311-Year Bill 3.33 3.41 3.482-Year Note 3.99 4.14 4.233-Year Note 4.52 4.70 4.695-Year Note 5.39 5.51 5.737-Year Note 5.94 6.00 6.3110-Year Note 6.45 6.50 6.8315-Year Bond 6.87 6.86 7.1930-Year Bond 7.31 7.32 7.61 Source: Cantor, Fitzgerald/Telerate

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