CREDIT : Bond Prices Rise as 3-Day Selloff Stops

The credit markets ended a three-day selloff Thursday with bond prices posting modest gains and interest rates easing.

The Treasury’s bellwether 30-year bond, which earlier this week lost about 2 points, or $20 per $1,000 face amount, rose nearly $2.50. That lowered its yield to 9.27% from Wednesday’s close of 9.29%.

Shorter maturing government issues and municipal bonds also rose in price, while corporate bonds were slightly lower.

Traders said investors were less concerned Thursday about inflation than they had been earlier in the week. The change in attitude came as the Commodity Research Bureau index, a key measure of inflation that tracks commodity futures prices, retreated from its highs earlier in the day.

Marshall B. Front, an economist at the Chicago investment firm Stein Roe & Farnham, said some bargain hunting also was prevalent in Thursday’s trading. “On a short-term basis the market appears to be oversold,” he said.

Bond prices tumbled after Tuesday’s trade report showing a sharp narrowing in the U.S. trade gap. Investors had worried that the rise in exports was a signal the economy was starting to overheat and inflation would follow.

In the secondary market for Treasury bonds, prices of short-term governments rose about 1/16 point. Intermediate maturities ranged from 1/32 point to 1/8 point higher and long-term issues were 1/8 point to 5/16 point higher, according to figures provided by Telerate Inc.

In the tax-exempt market, the bond buyer index of 40 actively traded municipal bonds was up 1/32 point at 86 15/16. The average yield was unchanged from late Wednesday at 8.24%.

Yields on three-month Treasury bills were down 5 basis points to 6.14%. Six-month bills rose 2 basis points to 6.55% and one-year bills were up 2 basis points at 6.91%. The federal funds rate, the interest on overnight loans between banks, traded at 6.938%, up from 6% on Wednesday.

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