CREDIT : Bond Prices End Higher After Late Rally

NEW YORK — Bond prices rose in a technical rally Friday to finish at the highs of the day.

The Treasury’s closely watched 30-year bond rose 17/32 point, or about $5 for every $1,000 in face value. Its yield fell to 9.19% from 9.25% late Thursday.

Analysts said the credit market sold off a bit in early trading, but demand for bonds set in and prices climbed throughout the rest of the session.

“We closed with a rally at the end,” noted William Brachfeld, an executive vice president at Daiwa Securities Inc.

Analysts said there was no strong reaction to a Labor Department report that consumer prices climbed a modest 0.3% in June. The overall June increase, which matched the rise for May, would amount to an annual inflation rate of 4.2% if prices climbed at the same pace for 12 straight months.

Short-Term Issues Rise

Robert Brusca, chief economist and senior vice president at Nikko Securities Co. International, said the report was in line with expectations. He also noted that declines in gasoline and clothing costs nearly offset a sharp increase in food prices, which did not give traders a clear reason to believe that inflation is on the rise.

A resurgence of inflation could prompt the Federal Reserve to tighten credit by nudging interest rates higher.

In the secondary market for Treasury bonds, prices of short-term government issues finished 3/32 point higher, intermediate maturities were 1/8 point to 5/32 point higher, and 20-year issues were up 17/32 point, according to figures provided by Telerate Inc., a business information service.

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 Shearson Lehman daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, was up 2.55 at 1,137.72.

Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, rose 0.47 to 282.02.

Three-month Treasury bills, meanwhile, fell 1 basis point to a discounted rate of 6.74% and a yield of 6.94%. Six-month bills fell 7 basis points to a discounted rate of 7.02% and a yield of 7.38%, while one-year bills fell 3 basis points to 7.23% to yield 7.73%.

A basis point is one-hundredth of a percentage point. The yield is the annualized return on an investment in a Treasury bill. The discounted rate is the interest rate the market uses to price bills.

The federal funds rate, the interest on overnight loans between banks, was quoted late in the day at 7.813%, down from 7.875% late Thursday.