WASHINGTON - Treasury bonds advanced slightly yesterday in thin trading as confusion continued to swirl over Orange County, Calif.'s bankruptcy filing.

Meanwhile, the short end lost ground, following a two-day rally fueled by a flight to quality and a fleeting notion that the Federal Reserve might hold off on another rate hike because of Orange County.

Bond prices were very volatile yesterday, even well after 3 p.m. when most trading usually stops. At 4.45 p.m., bonds were quoted up 9/32 at 95 24/32, pushing the yield down to 7.87%. The 10-year note was up three ticks at 100 1/2, yielding 7.79%.

Bills fell: yields on three-month bills inched up two basis points to 5.82% and returns on six-month maturities grew seven basis points to 6.45%.

Analysts cautioned against reading too much into yesterday's trading because the market is still sorting out the Orange County story as more and more information comes to light.

On Wednesday, Fed chairman Alan Greenspan dispelled the notion the Fed might postpone another rate hike by downplaying the Orange County situation in his testimony to the Joint Economic Committee of Congress and by saying growth was not yet slowing, analysts said.

In addition, the long end of the yield curve may have been bolstered yesterday by a strengthening dollar - reflecting the expectation of another rate increase - and a decline in stock price, analysts said.Treasury Market Yields Previous Previous Thursday Week Week3-Month Bill 5.80 5.71 5.366-Month Bill 6.43 6.27 5.881-Year Bill 7.01 6.91 6.362-Year Note 7.49 7.43 7.043-Year Note 7.65 7.62 7.395-Year Note 7.74 7.80 7.697-Year Note 7.75 7.84 7.8210-Year Note 7.78 7.91 7.9730-Year Bond 7.85 7.01 8.14 Source: Cantor, Fitzgerald / Telerate


Stock Market: The Dow Jones Industrial Average fell 49.79 points yesterday, to close at 3685.73.

Foreign Exchange: In late New York trading yesterday, the dollar was quoted at 100.51 Japanese yen and 1.5790 German marks.

Commodities: The Commodity Research Bureau's index closed up 1.39 points yesterday, at 229.90.

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