NEW YORK (CNNfn) - Treasury bonds moved higher Friday, ending a week of gains and pulling the 30-year yield below 6 percent for the first time in six months -- after a report on U.S. consumer prices failed to confirm investors' worst fears of rising inflation.
"The market failed to see a smoking gun or anything too worrisome," said Mike McGlone, analyst at IBJ Lanston Futures, referring to the inflation news.
Shortly before 3 p.m. ET, the 30-year bond rose 20/32 to 103-15/32. Its yield, which moves inversely to its price, fell to 5.99 percent from 6.04 percent Thursday. The decline marks the first time the yield has closed below 6 percent since Sept. 24.
Ten-year Treasury notes also advanced, gaining 13/32 to 102-7/32, its yield falling to 6.19 percent from 6.25 percent Thursday.
A tame core rate soothes inflation woes
The Consumer Price Index (CPI), which measures inflation at the retail level, rose 0.5 percent in February. The core rate, excluding volatile food and energy prices, edged up 0.2 percent, according to the Labor Department.
The CPI was slightly above Wall Street forecasts for a 0.4 percent increase, but the core rate was in line with expectations.
Because the core rate showed inflation remained contained, Michelle Girard, Treasury market analyst at Prudential Securities, told CNNfn's market coverage, the Fed may take a more gradual approach to raising rates. (176.4 WAV) (176.4K AIFF)
The report comes on the heels of another key inflation index, Thursday's Producer Price Index (PPI), which showed its largest monthly gain in almost 10 years. The PPI, a measure of inflation at the wholesale level, jumped 1 percent in February, due primarily to surging energy prices. But the core PPI was also in line with expectations.
But shorter-dated issues, such as two-year notes, underperformed longer-dated maturities. Analysts said these issues remained pressured due to their sensitivity to interest rates.
The belief is widespread the Federal Reserve Board will increase short-term interest rates by at least a quarter point at Tuesday's monetary policy meeting. The Fed has increased short-term interest rates four times since June in an effort to slow the economy and pre-empt inflation. But the U.S. economy continues to strengthen, and Fed chief Alan Greenspan has repeatedly signaled the central bank will raise rates until it sees a slowdown.
Despite expectations of rising interest rates, analysts were bullish about the market, noting it was in the process of taking back some of last year's losses. For fixed income securities, 1999's bear market was one of the worst years on record.
Dollar mixed
The dollar was mixed against the major currencies Friday. Shortly before 3 p.m. ET, the dollar changed hands at 106.70 yen, up from 105.51 yen Thursday, a 1.1 percent gain in the dollar's value.
Meanwhile, the euro traded at 97.26 cents, up from 97.09 cents Thursday, a 0.2 percent loss in the dollar's value. 
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