The University's endowment is suffering slightly because of the steady decline in the bond market since December, but the drop will not prove significant since Harvard sold many of its bonds in October.

George Putnam, treasurer of the University, said yesterday Harvard's total endowment has increased to more than $1.6 billion because of purchases of common stocks--especially in oil and defense--made in early October in response to rising interest rates.

He added that although "this has probably been the worst three-month period for bonds in history," bonds now constitute about 15 per cent of the University endowment.

Stocks Appreciated

"Appreciation has caused our stocks to increase to 70 per cent of the endowment--we've been fairly fortunate," Putnam said.

The University distributes a proportion of the interest from the endowment to different sectors of the University, including the Faculty.

Thomas O'Brien, vice president for financial affairs, said yesterday neither the 21-per-cent rise in the endowment since mid-1979 nor its recent slight decline because of the bond market will affect next year's Faculty budget.

"The bond market's drop will have no direct effect on the Faculty budget," O'Brien said, adding, "It takes years for the effect to work."

Budget Deficits

Robert E. Kaufmann '62, associate dean for finance and administration, said last month the Faculty probably will suffer a projected fiscal 1981 budget deficit of between $250,000 and $500,000.

Fluctuation in the endowment this year--including the rise because of prudent stock investment--will not affect next year's tuition or day-to-day expenditures, Putnam said.

"Although market fluctuations affect the total value of our portfolio, they don't affect our income at all, and income is what pays for those kinds of things," he added.

The drop in the bond market may affect the $25 million capital fund drive, however, because potential donors may give less this year than if there were a market boom, Putnam said.

"When the stock market goes up, that helps people give bigger gifts--it's a direct effect," Putnam said.

Because the University has so, much of its endowment in common stocks, Putnam says he believes Harvard is in good financial shape.

"We're in a good position to take advantage of whatever happens in the market," he said.