FINANCIAL MARKETS : CREDIT : Treasury Report Lifts Bond Prices

Bond prices rose after the government announced details of its quarterly refunding auction and a report indicated that April’s jobless rate may be higher than originally expected.

The closely watched 30-year bond advanced 7/16 point, or about $4.37 for each $1,000 in face amount. Its yield eased to 8.97% from 9.01% late Wednesday.

The Treasury said late Wednesday that it would sell a record $30.5 billion in new debt at its May 8-10 auction, about $500 million more than the previous record set in February.

But bond traders had been concerned that as much as $35 billion in new notes and bonds would be sold, glutting the market and depressing the value of existing debt securities.

“The uncertainty of what would be announced has been removed,” said William Veronda, a fixed-income specialist at Financial Programs Inc., a Denver investment firm. “It was only a relatively modest increase.”

The quarterly refunding auctions are critical to bond investors because they set the background for a range of interest rates that help determine the value of bonds as well as the pace of economic growth.

Low demand for new Treasury debt forces the government to raise yields to attract buyers, which can push interest rates up elsewhere. High demand eases the pressure on yields and can help ease or stabilize interest rates.

The federal funds rate, the interest rate that banks charge each other on overnight loans, was quoted at 8.188%, up from 6.50% late Wednesday. The 6.50% rate was abnormally low because of technicalities in settling bond trades.