CREDIT : Bond Prices Edge Higher at Close

Bond prices finished higher Friday as traders breathed a sigh of relief after negotiators in Washington reached an 11th-hour agreement on a plan to cut the federal budget deficit.

White House and congressional bargainers agreed on a $30-billion deficit reduction plan designed to meet the goals of the Gramm-Rudman budget law and reassure financial markets.

“The agreement came a little late in the day . . . and the bond market is up on the news, but nothing very vigorous,” said Robert Brusca, chief economist and senior vice president of fixed income at Nikko Securities Co. International.

Bond prices closed at their highs of the day but did not break new ground.

The bellwether 30-year Treasury bond was up 13/16 point, or about $8 for every $1,000 in face value. Its yield fell to 8.89% from 8.92% late Thursday.

“The bond market is looking nice and strong,” said Maria Ramirez, a managing director at Drexel Burnham Lambert. “There’s a little more room on the upside, assuming everything gets carried out the way it was agreed upon.”

Analysts said they do not expect the full reaction from the financial markets until the ink has dried on all the final resolutions.

Analysts said the bond market appeared to ignore a new government report that consumer prices rose a moderate 0.4% in October.

In secondary trading in the Treasury market, prices of short-term issues were up between 3/32 point and 5/32 point; intermediate maturities were up 5/32 point to 15/32 point, and 20-year issues rose 5/8 point, according to Telerate.

The Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, rose 0.36 to 110.85. The Shearson Lehman daily Treasury bond index, which makes a similar measurement, rose 3.60 to 1,160.01.

Corporate activity was not available. But Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, was up 0.81 to 265.80.

Yields on three-month Treasury bills were up 6 basis points to 5.69%. Six-month bills rose 6 basis points to 6.23%, but one-year bills fell 6 basis points to 6.43%.

The federal funds rate, the interest on overnight loans between banks, traded at 6.75%, down from 6.813% late Thursday.