Bond prices rallied Friday as traders breathed a sigh of relief that the government's latest round of borrowing was over and that a new government report on inflation contained no alarming disclosures.
The price of the Treasury's 30-year bond rose 1/2 point, or $5 for every $1,000 in face amount. Its yield fell to 9.17% from 9.22% late Thursday.
Sung Won Sohn, chief economist for Norwest Corp. in Minneapolis, said traders were relieved that the Treasury's auction of $26 billion in notes and bonds had been completed.
The three-day auction was completed on Thursday with the Treasury's sales of $8.5 billion in 30-year bonds.
Sohn said it appeared that Japanese investors, who have been important figures at such auctions in recent years, had bought a sizeable amount of both 10-year notes and 30-year bonds.
The bond market was cheered, he said, with the tiny 0.1% rise that occurred after excluding increases in the volatile food and energy categories.
Robert Chandross, chief economist at Lloyds Bank PLC in New York, said the report appeared to place no additional pressure on the Federal Reserve to tighten its credit policy.
In the secondary market for Treasury bonds, prices of short-term governments rose 2/32 point, intermediate maturities rose point and 20-year issues rose 13/32 point, according to figures provided by the financial information firm Telerate Inc.
The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.
The Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, rose 0.26 to 109.57. The Shearson Lehman Hutton composite index, which makes a similar measurement, rose 2.27 to 1,146.51.
The federal funds rate, the interest on overnight loans between banks, traded at 7.188%, up from 7% late Thursday.