Bonds

The surprise jump last week in the Institute for Supply Management's index of conditions in the manufacturing sector of the economy for December sent stock prices soaring and bond prices plummeting. Yields on five-year Treasury notes rose 25 basis points, and those on 10-year notes were up 22 basis points. The principal reason for the sharp gain in the index was a burst of new orders that was strong enough to cause some analysts to declare that the months-old flat spot for factory production was ending. Some other analysts were more skeptical, particularly since holiday sales gains were relatively modest. Now eyes are on the employment report for December, to be released Friday by the Labor Department. A small gain in payroll jobs is expected and possibly a small drop in the jobless rate.

Tomorrow, the Treasury will sell $15 billion each in three- and six-month bills, which yielded 1.21 percent and 1.25 percent, respectively, in when-issued trading Friday. Also tomorrow, the Treasury will announce details of an auction of four-week bills to be held Tuesday and of a sale of 10-year inflation-indexed notes to be held Wednesday.

-- John M. Berry