CREDIT : Bond Prices Rise on Hopes Dollar Will Be Bolstered

NEW YORK — Bond prices rose slightly Thursday on speculation that central banks in Europe would help prop up the dollar.

The Treasury’s benchmark 30-year bond rose 1/8 point, or $1.25 for every $1,000 in face value. Its yield fell to 8.98%.

Bonds received relatively little support from a Labor Department report that wholesale price inflation slowed to zero last month, traders said.

Low inflation preserves the value of fixed-income securities, and a report of flat prices usually buoys the bond market. But after a brief uptick after the morning report, prices fell back.

Traders said the Treasury bond market had trouble absorbing primary dealers’ sales of three- and 10-year notes that they had bought at auction earlier in the week.

The rumor that helped the bond market was that the Bank of Japan would ask European central banks to join it and the Federal Reserve in supporting the value of the dollar, according to Joseph Plocek, chief economist of McCarthy, Crisanti & Maffei Inc.

“The one item that will be required to turn dollar psychology around is coordinated intervention,” Plocek said. Prospects of a declining dollar cause investors to flee from dollar-denominated securities.

Despite the rumor, the dollar finished the trading day unchanged against the Japanese yen and slightly lower against other major currencies.

Secondary Market Mixed

Plocek said bonds were also helped somewhat by cuts in short-term interest rates by the Japanese and West German central banks.

In the secondary market for existing Treasury bonds, prices of short-term government issues slipped 1/32 to 1/16 point, intermediate maturities were unchanged and 20-year issues rose 3/16 point, according to Telerate Inc., a financial information service.

The movement of a point equals a change of $10 in the price of a bond with a $1,000 face value.

The Shearson Lehman Hutton daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, rose 0.12 to 1,144.21.

Corporate bonds also rose. Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, rose 0.18 to 294.85.

Municipal bonds edged upward. The Bond Buyers municipal bond index of 40 long-term, investment-grade issues rose to 91.375 from 91.25.

Yields on existing three-month Treasury bills, meanwhile, rose to 7.90% as the discount rose 8 basis points to 7.65%. Yields on six-month bills rose to 8.21% as the discount edged up 4 basis points to 7.79%. Yields on one-year bills rose to 8.38%, with the discount up 3 basis points at 7.80%.

A basis point is one-hundredth of a percentage point. The yield is the annualized return on an investment in a Treasury bill. The discount is the percentage that bills are selling below the face value, which is paid at maturity.

The federal funds rate, the interest on overnight loans between banks, was quoted at 8.25%, unchanged from late Wednesday.