The credit markets pulled out of their slump Wednesday as worries about the dollar abated.
Prices for bonds had started out mostly lower in reaction to the dollar's decline in foreign exchange, but the securities rebounded after the U.S. currency started to stabilize, said Nancy Vanden Houten, an economist with Merrill Lynch Capital Markets.
The dollar ended the trading session mixed amid signs of central bank intervention and statements of support from President Reagan and Japanese Prime Minister Noboru Takeshita.
A weak dollar is considered negative to the credit markets because it could signal higher inflation and make dollar-denominated bonds and notes less attractive for foreign investors.
In the secondary market for Treasury bonds, the bellwether 30-year issue rose 7/8 point, or about $8.75 per $1,000 face amount. Its yield, which moves inversely to its price, fell to 9.01% from 9.09%.
Prices of short-term governments rose 3/32 point, intermediate maturities were up between 1/8 point and 1/2 point and 20-year issues rose about 7/8 point, according to figures provided by Telerate Inc., a financial reporting service.
In corporate trading, industrials were up 5/8 point and utilities gained 1/2 point in active trading, according to the investment firm of Salomon Bros.
Yields on three-month Treasury bills were down 4 basis points to 5.78%. Six-month bills fell 5 basis points to 6.27% and one-year bills were off 3 basis points at 6.63%. A basis point is one-hundredth of a percentage point.
The federal funds rate, the interest on overnight loans between banks, traded at 6.50%, up from 5.83% late Tuesday.
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