The Treasury market traded quietly yesterday in the absence of any economic news, and prices ended little changed.

Late in the afternoon, the 30-year bond was 1/32 higher and yielded 6.67%.

Prices declined in early New York trading, then found some support at the lower levels and traded back up.

On Tuesday, the bond market sold off when the Commodity Research Bureau Index posted a five-point increase and spot gold jumped more than $6 an ounce.

Traders said the market was still keeping an eye on commodity prices yesterday. The CRB index closed little changed and the continuing escalation in the price of gold didn't seem to have much impact on prices. Spot gold rose $4.95 to close at $397.15 an ounce.

"Practically speaking, the market is sitting around waiting for next week's numbers," said Jerry Zukowski, an economist at PaineWebber.

In the meantime, Zukowski said, participants are caught in a dilemma that is typical of this year's trading: "The levels scare some people away, but the price action is encouraging them to continue to purchase securities.

Although the bond market seemed to stabilize yesterday, traders questioned whether the current levels could be sustained.

"The moth is flying especially close to the flame here," the head of a trading desk said.

With two-year notes yielding less than 4% and five-year notes close to 5%, "you need a continued torrent of good news to sustain those levels and the smallest fly in the ointment will produce a setback, as we've had in the last two days," the desk head said.

He said customers are growing cautious, and he said he's seen many accounts shorten the duration of their holdings as a defensive move.

The desk head argued that the good inflation news expected from next week's June price reports has already been accounted for in Treasury prices.

The consensus calls for a 0.3% decline in June producer prices and a 0.1% decrease in the core rate of producer prices. The June consumer price report is expected to increase just 0.1%, with the core rate of consumer prices rising 0.2%..

A government note trader said he did not believe that good producer and consumer price reports were fully priced in, but he said that a rally on those numbers would be the market's "last gasp."

"After next week, my best guess is the market will move to higher yields until Labor Day weekend," the trader said.

The market's recent rally has been fueled by weak economic statistics and the expectation that the taxes in the Clinton administration's economic package will slow the economy even more.

Zukowski said he expects rates to head higher in coming months as the economic statistics show more strength. Consumer demand has held up well, which should eventually bolster the manufacturing sector, and auto manufacturers are planning to boost production during the quarter, he said.

The desk head said the deficit reduction package is also a matter for concern, with bond market participants worrying that members of Congress will get cold feet during the current recess. "I think people are saying in the back of their minds, what if these guys come back and can't pull the trigger." he said.

Zukowski said participants were somewhat interested in this morning's jobless claims report, as well as tomorrow's release of the minutes from the May Federal Open Market Committee meeting, at which Fed officials reportedly adopted a bias toward tightening.

"I think there will be some interest in how that decision was arrived at," he said.

Traders are also wondering whether the results of the two-day FOMC meeting that ended yesterday will show up in newspapers today or tomorrow. But Zukowski pointed out that there have been a number of complaints recently about the leak of the May decision.

In any case, he doubts Fed officials decided to shift back to a neutral bias. "Rightly or wrongly, the Fed believes their shift to an asymmetrical bias fueled the bond market's rally." Zukowski said.

The consensus forecast calls for a 1,000 increase in jobless claims for the week ended July 3, to 441,000.

Later today, the Federal Reserve's report on May consumer installment credit is expected to show a $2.6 billion increase in outstanding credit, following the $2.3 billion April gain.

The September bond futures contract closed unchanged at 113 23/32.

In the cash market, the 7 1/8% 30-year bond was 1/32 lower, 105 23/32- 105 25/32, to yield 6.67%

The 6 1/4% 10-year note was unchanged. at 103 12/32-103 14/32, to yield 5.77%.

The three-year 4 1/4% note was up 1/32, at 99 25/32-99 27/32, to yield 4.30%.

Rates on Treasury bills were mixed, with the three-month bill up three basis points at 3.04%. the six-month bill up two basis points at 3.12%. and the year bill steady at 3.30%.

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