Most Treasury prices sagged a little in quiet trading yesterday as participants lightened their positions ahead of tomorrow's critical June employment report.

Late in the day, the 30-year bond was off 1/16 point to yield 1.77%.

Anticipation of another cut in short-term rates by the Federal Reserve continues to support Treasury prices, traders said.

The recent string of weaker than expected economic indicators has encouraged those hopes, including last week's durable goods and jobless claims reports and Monday's May home sales.

As the talk about a possible Fed easing increased, economists said the employment report has become even more important than it usually is.

The jobs report is the first comprehensive look at June's economic activity, and analysts say it will take a weak report to persuade Fed policymakers to ease.

Activity slowed yesterday as investors and traders waited for tomorrow's number.

"There doesn't seem to be a heck of a lot happening," a coupon trader said, adding that the end of the fiscal quarter may also have put a damper on trading yesterday.

Traders blamed yesterday's modest declines on a small amount of selling that occurred as participants fine-tuned their positions to prepare for the June jobs report.

Anthony Karydakis, a senior financial economist at First Chicago Securities, said participants may have added to their inventories as prices rallied in recent sessions.

As the market heads into the employment report, investors will tend to pare back positions, which means prices could move a little lower again today, Mr. Karydakis said.

"I've seen guys taking profits," a bond salesman said. "I think it's prudent to take profits."

The salesman argued the short-term securities have already accounted for a 25-basis-point cut in the funds rate in current price levels. At most, the yield on the two-year note might drop another 10 basis points if the Fed eased, he said, and that move does not reward investors enough to offset the risk that the jobs data will be strong and the Fed will hold policy steady.

No one expects big losses though, in part because they say traders will be wary of establishing short positions before they see the jobs data.

Yesterday's indicators matched the market's expectations and had little impact on Treasury prices.

The May index of leading indicators rose 0.6%, while April's increase was revised to 0.3% from the 0.4% gain reported last month.

Five of the 11 components of the index made positive contributions, including sensitive materials prices, the average work week, vendor performance, stock prices, and consumer expectations.

Matthew Alexy, an economist at First Boston Corp., said the leading indicators report is rarely a surprise, because most of the components are known ahead of time.

Nor is the index much help in assessing the economy, Mr. Alexy said.

"It's telling us the economy is growing, and we all know the economy is growing," he said. "But the rate is unacceptably slow and this doesn't tell us much about the rate of growth."

Later in the morning, the Chicago purchasing managers association said its June index improved to 55.7 from 54.7 on an adjusted basis.

That suggests this morning's June report from the National Association of Purchasing Management will also rise, but the consensus forecast calls for a small decline in the national June number to 55.2 from the 56.3 reading in May.

Also yesterday, the Conference Board said its survey of consumer sentiment shows no advance in confidence during June. The index came in at 71.7, down from a revised 71.9 in May. That contrasts with the big gains posted in April and May.

The Conference Board said consumers were a little more optimistic about current conditions but a little less optimistic about the "immediate months ahead."

The September bond futures contract closed 1/16 lower at 100 21/32.

In the cash market, the 30-year 8% bond was 1/16 lower, at 102 15/32-102 19/32, to yield 7.77%.

The 7 1/2% 10-year note fell 1/8, to 102 18/32-102 22/32, to yield 7.11%.

The three-year 5 7/8% note was unchanged, at 101 15/32-101 17/32, to yield 5.29%.

Rates on Treasury bills were mixed, with the three-month bill down two basis points at 3.5%, the six-month bill off one basis point at 3.65%, and the year bill up one basis point at 3.89%.

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