Treasury bond prices slumped Friday in a broad market retreat that analysts called an apt finish to the worst bond year in a generation.

Activity trickled to a close by midafternoon in abbreviated pre-holiday trading. The few market players sold bonds, partly in reaction to a fresh sign of inflation that reinforced the bearishness that has persisted through 1994.The price of the Treasury's main 30-year bond dropped 13/32 point, or $4.06 per $1,000 in face value. Its yield, which moves in the opposite direction, rose to 7.87 percent from 7.83 percent late Thursday. A year ago, the 30-year Treasury yield was 6.34 percent.

Prices of short-term Treasury securities, meanwhile, ranged from 1-32 point to 1-16 point lower and intermediate maturities dropped by 3-32 point to 3-16 point, the Telerate Inc. financial information service reported.

Trading volume was typically lackluster for this time of year, and the market closed at 2 p.m. Eastern time for the three-day New Year's weekend.

Adding a degree of downward pressure on bond prices was a morning report from the Purchasing Management Association of Chicago.

The regional group said its index of area business activity rose to 67.5 percent in December on a seasonally adjusted basis from 67.4 percent in November. A reading above 50 percent indicates that manufacturing operations are expanding.

Company purchasing managers also reported continued strong upward pressure on the prices they pay suppliers and charge consumers.

The report, a harbinger of a national manufacturing survey due out on Tuesday, renewed worries of higher inflation among traders in fixed-income securities. Higher prices in the economy can diminish the value of bonds and other securities that pay a preset interest rate.

Analysts said the pessimism was an appropriate cap to the worst year in bonds since 1969, when yields soared 37 percent to 7.65 percent from 5.60 percent in the 14-month period ending Dec. 1969.

This time around, yields on bonds jumped more than 35 percent, ending at 7.88 percent Friday from a 25-year low of 5.79 percent set on Oct. 15, 1993.

Most of the yield surge came in the past 11 months, after the Federal Reserve Board began raising interest rates in early February in an effort to combat inflation pressures.

As returns on newly sold bonds rose, holders of existing fixed-income securities saw their value drop. Some of that loss in principal value was offset by the interest payments investors receive on their bonds.

Still, investors by the end of 1994 lost about 15 percent of their investment in 30-year bonds bought in October 1993, said Eric Olsen of L.H.O. Investments in New Canaan, Conn.

Friday's price drop continued that trend.

"That the downdraft today stems from signs of strong economic activity is symbolic of what drove down the market the bulk of the year," said Elliott Platt, director of economic research at Donaldson, Lufkin & Jenrette Securities Corp.

The Treasury market's outlook remains uncertain in 1995. The Fed is expected to continue its drive to push up interest rates, and market players hope the campaign slows the economy and curbs the inflation pressures that can erode the value of bonds.

But investors and traders caught off guard by this year's sharp reversal of fortune are not likely to resume their bullishness anytime soon, analysts said.

The Lehman Brothers Daily Treasury Bond Index, reflecting price movements on bonds with maturities of a year or longer, fell 1.65 to 1,173.83.

Yields on three-month Treasury bills rose to 5.70 percent as the discount increased .09 percentage point to 5.55 percent. Six-month yields were higher at 6.48 percent as the discount rose .03 point to 6.20 percent. One-year yields increased to 7.15 percent as the discount rose .04 point to 6.72 percent.

Yields are the interest bonds pay by maturity, while the discount is the interest at which they are sold.