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BOND-PRICE RALLY SENDS INTEREST RATES LOWER

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New signs of economic weakness sparked a rally in government bond prices Friday, sending interest rates lower.

The Treasury's closely watched 30-year bond jumped 7/16 point, or $4.37 for every $1,000 in face value. Its yield, which falls when its price rises, tumbled to 7.88 percent from 7.92 percent late Thursday.The Labor Department reported that November's unemployment rate crept up to 5.4 percent from 5.3 percent in October.

While the report showed non-farm payrolls expanded by an unexpectedly large 210,000, it also contained a sharp downward revision in payroll growth in October, which cheered bond traders. The number of new non-farm jobs created in October was adjusted to 93,000 from 233,000.

Traders have been hoping for evidence of sluggish economic activity.

"The data were viewed as constructive for the bond market," said William Sullivan, director of money-market research at Dean Witter Reynolds Inc.

Each new indication of economic weakness improves the chances that the Federal Reserve will try to stimulate growth by pushing interest rates lower, analysts say. Lower rates tend to boost bond prices.

Analysts doubt the central bank will make any dramatic moves soon, however, because some sectors of the economy still are strong.

By late morning, Sullivan said, it appeared the initial euphoria over the jobless report was beginning to fade as traders realized that a shift in Fed policy probably was not imminent.

In the secondary market for Treasury bonds, prices of short-term government issues rose 3/16 point to 1/4 point, intermediate maturities gained 5/16 point to 13/32 point and long-term issues advanced 13/32 point to 7/16 point, according to figures provided by Telerate Inc., a financial information service.

The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.

In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds rose 1/8 point. The average yield to maturity slipped to 7.26 percent from 7.27 percent late Thursday.

Yields on three-month Treasury bills dropped to 7.82 percent as the discount tumbled 10 basis points to 7.58 percent. Yields on six-month bills fell to 7.69 percent as the discount lost 8 basis points at 7.32 percent. Yields on one-year bills retreated to 7.68 percent as the discount fell 10 basis points to 7.19 percent.