NEW YORK (CNNfn) - Treasury bonds ended lower Friday, giving back early gains, as soaring U.S. stocks lured investors away from the safety of Treasurys to more profit-generating trades.
In an abbreviated session, traders said many market participants opted for the sidelines ahead of the holiday weekend. U.S. financial markets will be closed Monday in observance of Martin Luther King Day.
Just after 2 p.m. ET, the price of the benchmark 30-year bond fell 12/32 to 92-25/32. Its yield, which moves inversely to its price, rose to 6.68 percent from 6.65 percent Thursday.
Comments late Thursday from Federal Reserve Chairman Alan Greenspan that suggested the Fed will take a more gradual approach in increasing interest rates calmed investors' worst fears of more aggressive action.
Earlier in the week, bond market participants expressed caution the Fed will hike rates as much as one-half a percentage point at its next meeting on Feb. 1 and 2.
However, Tony Crescenzi noted the bearish trend remains. "The more the Fed sticks with a gradualist approach, the more it gives stock investors confidence interest rates will not go up exceedingly. It's creating a lure for stocks."
In addition, a weak European bond market and rising oil prices weighed Treasurys. In New York, February crude oil futures last traded at $28.00 a barrel, a nine-year high. Rising oil suggests higher inflation ahead.
On the inflation front, Treasury bonds rose early in the session following the release of a tame consumer price index (CPI) report. The CPI, which measures price changes of goods and services, rose 0.2 percent in December, according to the Labor Department. Analysts surveyed by Briefing.com forecasted a 0.3 percent increase.
The market also received friendly inflation news Thursday when it was announced that the producer price index, a measure of inflation at the wholesale level, rose 0.3 percent in December, in line with analysts' expectations.
Euro loses ground
The euro fell sharply Friday, hitting a one-and-a-half-week low against the dollar. Analysts said the dollar's strength was due mainly to a robust U.S. equity market. Rising U.S. share prices attract overseas investors, who purchase stocks in local currency.
"The sharp rally on Wall Street is filtering through the currency market and lifting the U.S. dollar," said Alex Beuzelin, senior market analyst at Ruesch International.
In addition, a contrast in interest rate outlooks burdened the euro. European interest rates are expected to hold steady in the near-term, while U.S. rates are forecasted to increase. Higher rates make the local currency more attractive.
Just after 2 p.m. ET, the single currency fell to $1.0150 from $1.0256 Thursday, a 0.1 percent gain in the dollar's value.
The dollar, meanwhile, fell to 105.80 yen from 106.30 Thursday, a 0.5 percent loss in the dollar's value. 
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