FINANCIAL MARKETS : CREDIT : Bond Prices Climb on Home Sale Report

Bond prices rose, bouncing back from a two-day tumble after the government said sales of new homes fell in January to the lowest level in nearly a year.

The Treasury’s closely watched 30-year bond rose 11/16 point, or about $7 for every $1,000 in face value after losing nearly 1 3/4 points during the past two session.

Its yield dropped to 8.54% from 8.60% late Thursday.

Bond prices moved higher after the Commerce Department reported that new home sales dropped 7.1% in January, suggesting that the economy remains weak.

“The market used that basically as an excuse to start buying (bonds),” said Kevin Flanagan, a money market economist at Dean Witter Reynolds Inc.

The federal funds rate, the interest rate banks charge each other on overnight loans, was unchanged at 8.313%.