Treasury note and bond prices surrendered their earlier gains late yesterday after the market saw the lackluster results from the five-year note sale.

The 30-year bond closed 1/16 higher yesterday to yield 8.50%, the fourth session in a row it has ended at that level.

The market has been struck at that 8.50% level because "people are waiting for more news here," said Frederick Leiner, a market strategist at Continental Illinois Bank & Trust Co.

The only news the market got yesterday was the second revision to the first-quarter gross national product. Traders ignored that number and concentrated instead on the Treasury's auction of $9.25 billion of five-year notes.

The notes were auctioned at an average yield of 7.96% and will bear a 7 7.8% coupon, up from the 7.69% yield and 7 5/8% coupon at last month's auction.

The results showed 37% of the bids had been accepted at 7.97%, when the market had expected the auction to stop at 7.96%, which suggests some traders were awarded more securities than they expected.

"It didn't go quite as well as I think most people were anticipating," Mr. Leiner said. "Still, it wasn't a disaster."

By late yesterday afternoon, the price on the when-issued five-years had fallen a little more and the notes were yielding 7.98%.

A note trader said the approach of quarter's end may have limited the number of potential buyers. "There are just not enough people around here at quarter's end to make the thing go."

Another trader said the market was to blame for rallying yesterday morning and driving down the yield on the five-year notes. "The idiots had to run it up into the auction and it failed at the highs," he said.

The results did show small investors entered a robust $888 million of noncompetitive bids, up from $597 million at last month's sale and an average of $500 million over the last 12 auctions.

Mr. Leioner said the yield might have been the lure for small investors. "This is the highest yield we've had on the five-year since the end of last year," he said.

Traders said the only other notable event yesterday afternoon, Federal Reserve Chairman Alan

Treasury Market Yields

Prev. Prev.

Wednesday Week Month

3-Month Bill 5.71 5.72 5.60

6-Month Bill 599 6.01 5.86

1-Year Bill 6.32 6.31 6.07

2-Year Note 7.00 6.88 6.59

3-Year Note 7.39 7.33 7.04

4-Year Note 7.58 7.56 7.27

5-Year Note 7.98 7.92 7.65

7-Year Note 8.20 8.17 7.91

10-Year Note 8.32 8.31 8.05

20-Year Bond 8.51 8.50 8.29

30-Year Bond 8.50 8.50 8.28

Source: Cantor, Fitzgerald/Telerate

Greenspan's comments on the credit crunch, did not affect prices.

Mr. Greenspan told the Senate Banking Committee the credit crunch "has probably topped out, but it has shown very little in the way of improvement."

Analysts said the remarks were similar to what the Fed Chairman said last week.

The market had started out with a firmer tone yesterday.

The long end got a bid in Tokyo when an account bought bonds and the intermediate sector improved during the London morning session on buying related to a new seven-year Eurobond issue.

Traders said the price improvement reflected a sense of relief that Wednesday's two-year auction was out of the way. And the market's ability to hold its ground Tuesday in the face of some unfavorable indicators may have caused some short-covering, they said.

Mr. Leiner said he was a little negative on the market.

"The best the market will do is sit here, and there is a chance that we break down," he said. "The bulls should be discouraged by the fact that the market has not been able to bounce any more than it has from these levels."

Some traders said the market might come under pressure today and tomorrow if dealers and investment managers need to reduce their positions further ahead of the quarter's end.

Today's statistics are not expected to be bullish for bonds. Economists surveyed by The Bond Buyer expect a 0.6% rise in May personal income, a 0.9% increase in May personal spending, and a 12,000 decrease in new jobless claims, to 436,000.

Carol Stone, a senior economist at Nomura Securities International, said it would be worth keeping an eye on the press conference following this mornings' Bundesbank meeting in the wake of yesterday's higher-than-expected German inflation figures.

The September bond future contract closed unchanged at 92 21/32.

In the cash market, the 30-year 8 1.8% bond was 1/16 higher, at 95 24/32-95 28/32, to yield 8.50%.

The 8% 10-year note was unchanged, at 97 23/32-97 27/32, to yield 8.32%.

The three-year 7% note was down 1/32, at 98 29/32-98 31/32, to yield 7.39%.

In when-issued trading, the 7% two-year note was 3/32 higher, at 99 31-100, to yield 7%, down from the 7.06% average yield at Wednesday's auction.

Rates on Treasury bills were lower, with the three-month bill down two basis points at 5.56%, the six-month bill off one basis point at 5.75%, and the year bill two basis points lower at 5.97%.

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