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Bond prices rise after factory report

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NEW YORK -- Bond prices rose Friday after a report revealing the sharpest drop in more than a year in prices charged by factories.

The price of the benchmark 30-year Treasury bond rose 9/16 point, or $5.53 per $1,000 in face value. Its yield, which moves in the opposite direction, fell to 5.52 percent from 5.56 percent late Thursday.Traders were heartened by a report showing that prices for finished goods fell 0.4 percent last month, nearly reversing an unusually large 0.5 percent jump in January.

Recent signs of economic strength, including a report Thursday showing vigorous retail sales, have fueled worries the Federal Reserve might raise interest rates to slow the pace of borrowing and ease inflationary forces. Rising prices make fixed-income investments such as bonds less appealing.

In the broader market Friday, prices of short-term Treasury securities rose 3/32 to 9/32 point, and intermediate maturities rose 11/32 to 3/8 point, reported Bridge Telerate, a financial information service.

The Lehman Brothers Daily Treasury Bond Index, reflecting price movements on bonds with maturities of a year or longer, rose 3.12 points from late Thursday to 1,286.91.

Yields on three-month Treasury bills eased to 4.59 percent, while the discount fell 0.01 percentage point from late Thursday to 4.47 percent. Six-month yields fell to 4.66 percent, as the discount fell 0.02 percentage point to 4.49 percent. One-year yields fell to 4.72 percent as the discount fell 0.03 percentage point to 5.50 percent.

Yields are the interest bonds pay by maturity, while the discount is the interest at which they are sold.

The federal funds rate, the interest on overnight loans between banks, fell to 4.75 percent from 4.88 percent late Thursday.