CREDIT : Bond Yields Climb to Post-Crash High

NEW YORK — Interest rates climbed higher as the value of bonds declined Wednesday, largely because of continued fears of inflation.

The yield on the Treasury’s bellwether 30-year issue soared to 9.29%, up from Tuesday’s close of 9.21% and the highest level since the stock market crash seven months ago. Its price fell about 3/4 point, or $7.50 per $1,000 face amount.

Elizabeth G. Reiners, an economist at Dean Witter Reynolds, said fears of higher inflation once again dominated the markets, following Tuesday’s release of better-than-expected trade figures.

The Commerce Department said the nation’s trade gap shrank more than $4 billion in March to $9.7 billion, the lowest monthly deficit in three years.

Bondholders, though, view a sharp jump in exports as a sign the economy could overheat and generate higher inflation, which erodes the value of fixed-income investments.

Adding to bondholders’ worries Wednesday were reports that the Federal Reserve took between $2 billion and $3 billion out of the system, Reiners said.

Move Called ‘Technical’

She said, however, it was unlikely the Fed was tightening its credit policies. “It just looks like it was technical,” she said.

The closely watched federal funds rate, the interest charged on overnight loans between banks, closed at 6%, down from 6.75% late Tuesday.

In the secondary market for Treasury bonds, prices of short-term governments fell about 1/16 point; intermediate maturities declined from point to 7/16 point, and long-term issues were about 3/4 point lower, according to figures provided by Telerate Inc., the business information concern.

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 Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, lost 0.30 to 108.63. The Shearson Lehman Hutton daily Treasury bond index, which makes a similar measurement, stood at 1,137.02, down 3.55.

Corporate bonds also declined. Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, fell 0.26 to 276.30.

In the tax-exempt market, the bond buyer index of 40 actively traded municipal bonds was down about 3/4 point at 18 29/32 as of 3 p.m. EDT. The average yield rose to 8.24% from 8.16% late Tuesday.

Yields on three-month Treasury bills were down 11 basis points to 6.19%. Six-month bills were down 2 basis points at 6.53% and one-year bills were up 1 basis point at 6.89%. A basis point is one-hundredth of a percentage point.

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