NEW YORK (Bloomberg) — CIT Group Inc., the commercial lender run by John Thain that emerged from bankruptcy in December, is staging a bond market comeback.

CIT's $7.36 billion of 7 percent notes due 2017 have climbed 8.5 cents on the dollar to 94.375 cents since the company left Chapter 11 protection on Dec. 10, rewarding bondholders from Loomis Sayles & Co. to Pacific Investment Management Co. The notes have returned 10.8 percent this year including reinvested interest, more than triple the 3.4 percent gain in the Bank of America Merrill Lynch U.S. Corporates, Banks index.

The rally shows New York-based CIT may be able to reduce financing costs after accepting a rescue package in July that was described as "Don Corleone financing". This year's economic rebound coupled with last year's unfreezing in credit markets is helping CIT, which lends to small and medium-sized businesses.

"CIT's securities have taken off," said Matthew Eagan, a money manager at Loomis Sayles in Boston, which oversees more than $142 billion in equity and fixed-income assets. "The door has cracked open for finance companies to fund themselves in the unsecured markets and that can create a virtuous cycle."

The CIT notes yield 8.05 percent, or 4.2 percentage points more than similar-maturity Treasuries, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. That compares with a spread of 4.1 percentage points for the highest-rated junk bonds — rated below BBB- at Standard & Poor's — Bank of America Merrill Lynch index data show.

"They could sell debt at these spreads," Eagan said. The company has no credit rating.

CIT has $36.5 billion in bonds and loans outstanding. Last month, the lender raised $667 million by selling bonds backed by equipment debt using an expired government program, and arranged $1 billion in financing for clients.

The company last issued unsecured debt in the first quarter of 2008. In a November 2007 offering, CIT sold $2 billion of five-year, 7.625 percent notes.

As credit markets seized up amid mounting losses on subprime mortgage securities, CIT had to draw down $7.3 billion of emergency credit lines in March 2008.

After then being denied access to a Federal Deposit Insurance Corp. programme to issue government-back securities, CIT arranged $3 billion of financing in July from a group of bondholders that included Newport Beach, California-based Pimco, manager of the world's biggest bond fund.

CIT agreed to pay annual interest of at least 13 percent and a 5 percent fee to creditors on the loan. The company pledged assets worth more than five times the amount as collateral. At the time, Egan-Jones president Sean Egan described the loan as "Don Corleone Financing".

CIT filed for bankruptcy in November after posting nine qusarters of losses totaling more than $5 billion. The company emerged from court protection after cutting $10.4 billion of debt and delaying maturities by at least three years, with a plan to operate more businesses through banking units so they can tap financing from lower-cost deposits backed by the FDIC.

"The probability of CIT finding some sort of viable funding model is far higher in the market's eyes than it was six months ago," said Jason Mudrick, president of investment firm Mudrick Capital Management LP.s