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Subject: Credit Market
Date: Tue, 3 Nov 92 12:44:32 EST
Message-ID: <1.1992Nov3.124433@AmeriCast.com>


11/3/92


TITLE Credit Market Rates Continue To Move Higher;

Highest Bill Return Since August Phil Hawkins

NEW YORK -
 Market prices gfntinued to fall yesterday as tension mounted
over today's national election and a huge future new Treasury
sale announcement.

For example, the key 71/4% Treasury bond of 2022 dropped by about
1/2 point, or $5 for every $1,000 face amount, to a price of
around 951/8, where the yield was approximately 7.66%. It now is
51/4 points - $52.50 per $1,000 - beneath its six-year high on
Sept. 8 of 1003/8, to yield 7.22%.  Two recent new Treasury notes
slumped below their original prices in sales totaling $25.75 bil-
lion last week. They initially comprised $15 billion of two-year
41/4% notes yielding 4.37% and $10.75 billion of five-year 53/4%
notes yielding 5.84%. Their yields had climbed late yesterday to
about 4.47% and 5.98%, respectively.  A formidable new quarterly
refunding sale will be unveiled today by the Treasury. It may in-
clude about $37 billion of three-year notes, 10-year notes and
30-year bonds to be offered next week, with an intervening market
closing on Nov. 11 in observance of Veterans Day.  A federally-
sponsored agency plans a two-part new sale of $900 million today.
The Federal National Mortgage Association will offer $600 million
of five-year debentures and $300 million of 10-year debentures
through many brokerage firms and commercial banks.  Two new cor-
porate sales were launched yesterday.

Tiphook Finance Corp.'s $150 million of 10-year 103/4% notes,
rated Ba- 1 by Moody's and BBB- by Standard & Poor's, were priced
at 100. They were distributed by a Salomon Brothers Inc. syndi-
cate.  Wachovia Bank of North Carolina offered $100 million of
one-year 33/4% notes priced at 100. Its notes, rated Aa-2 and
AA+, became available through underwriters headed by Goldman,
Sachs & Co.  Treasury bills and other money market instruments
likewise extended their price slide in the latest session. Bill
prices were slashed whereby the interest returns increased by
about 0.05 or 0.06 percentage point.  Moreover, the weekly auc-
tion of new bills yesterday produced the consecutively highest
returns since August. It comprised a total of $23.6 billion in
equal amounts of three-month and six-month bills, each requiring
a purchase of at least $10,000.

The new three-month bills furnished an average discount rate of
3.05%, up from 2.97% last week and the most since 3.17% at the
auction on Aug. 31. The 3.05% rate, which resulted from an aver-
age price of 99.299, would be equivalent to a bond yield over
three months of 3.12%.  New six- months bills provided an average
discount rate of 3.27%, up from 3.22% a week earlier and the
highest since 3.30% at the sale on Aug. 3. The 3.27% rate was set
by an average price of 98.347 and would be the same as a bond
yield over six months of 3.37%.  Purchase orders at yesterday's
auction totaled about $32.23 billion for the three-month bills
and $31.56 billion for the six-month bills. These included
respective portions of about $1.47 billion and $967 million from
individuals and other small investors.  "Market participants
flocked to the sideline and certainly weren't willing to bet on
the outcome of the election," commented Susan Talbot, senior mo-
ney market analyst at Technical Data, Boston. "Despite this un-
certainty, today's new bill auction went well." A $15 billion
sale of special 41-day cash management bills will be conducted on
Thursday by the Treasury. The bills, which mature Dec. 17, are to
be offered solely to competing bidders in minimum denominations
of $1 million.  The benchmark federal funds rate on overnight in-
terbank loans ranged from about 31/8% to 31/4% after averaging
3.04% on Friday. The Federal Reserve, which currently is target-
ing the rate at about 3%, indirectly supplied an additional $2.5
billion of funds temporarily.  The interest rate on U.S. savings
bonds from this month through next April was set at 5.04%, down
from 5.58% in the prior six months. If held for five years or
longer, however, the bonds pay interest at the higher of 6% or an
average of the semiannual rates during the holding period.

This article is copyright 1992 Investors Business Daily. Redis-
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