Brisk Sales Drive Increase In Bond Prices

Decent demand for $13 billion in new three-year notes auctioned Tuesday by the Treasury Department helped buoy the broader bond market despite early concerns investors might be discouraged by expensive prices.

The price of the benchmark 30-year Treasury bond rose 7/32 point, or $2.19 per $1,000 in face value.

Its yield, which moves in the opposite direction, fell to 5.92 percent from late Monday’s rate of 5.94 percent.

“I think it’s a market that took on the three-year note auction reasonably well,” said Dana Johnson, head of market analysis at First Chicago Capital Markets.

Traders bid up the three-year note going into the auction, the first in a three-part, $35 billion quarterly refunding, expecting shrinking deficits will curb government borrowing and make Treasury securities more attractive.

The average yield on the new three-year note fell in the auction to the lowest level in two years - demonstrating ample demand. The average yield was 5.414 percent, down from 5.762 percent at the last auction on Nov. 4.

“The market still has a positive tone overall, expecting to see limited supply from the Treasury, low inflation and moderating growth because of Asia,” Johnson said. “There is still OK value in the market.”

Some of the stocks that moved substantially or traded heavily Tuesday:

NYSE

Duane Reade, up at 21-9/16 from IPO at 16-1/2.

The drug store chain sold about 7.3 million shares for $16.50 each, or $120 million total, in an initial public offering. Duane Reade operates 67 drug stores in New York City.

U.S. Filter, down 3 at 31-9/16.

Culligan Water Technologies, up 15-1/8 at 54.

U.S. Filter agreed to acquire the rival water treatment concern for about $1.5 billion in stock. U.S. Filter is to swap 1.714 shares for each share of Culligan.

America Online, down 1-7/16 at 109.

The online service, which reported its latest results after Tuesday’s close, edged lower after surging on Monday amid news that the company was raising its monthly access fees by 10 percent to $21.95.

NASDAQ

Applied Materials, up 1-1/4 at 36.

The leading manufacturer of equipment used to make semiconductors, which has considerable exposure to the beleaguered Asian economy, rose in advance of its latest profit report, which came out after the close and exceeded forecasts.

Geotek Communications, up 3/16 at 1-27/32.

The provider of mobile communications services announced that two members of the company’s board of directors have purchased a combined 480,000 shares of Geotek common stock on the open market.