NEW YORK (CNN/Money) - U.S. Treasurys erased early losses and turned mostly higher during Friday's shortened session as softer stocks prompted investors to cover short positions before the holiday weekend.
The rally reversed earlier weakness that resulted from the University of Michigan's January consumer sentiment index, which jumped to 94.2 -- its highest level in a year -- and stimulated debate over whether the Federal Reserve will cut interest rates again at month's end.
But a lack of follow-through selling helped Treasury securities head higher by the end of the session.
At the 2:00 p.m. close, two-year Treasury notes were up 1/32 at 100-22/32, yielding 2.88 percent, and five-year notes were up 3/32 at 97-3/32, yielding 4.17 percent.
Benchmark 10-year notes were 9/32 firmer at 100-26/32, yielding 4.89 percent, down from 4.92 percent at Thursday's close. The 30-year bond gained 24/32 at 100-11/32, yielding 5.35 percent, down from 5.41 percent at yesterday's close.
"Most of these trades are short sales for short-term trades. And especially before a long weekend, you want to cover and go home flat," said Marcello Frustaci, bond trader at Fuji Securities.
The bond market closed early on Friday and will remain closed on Monday in observance of the Martin Luther King, Jr. holiday.
Equity weakness also contributed to debt market gains Friday, analysts said. Stocks sagged after Microsoft said late Thursday that its profit fell due to a $660 million legal charge, and the software giant said it expects more sluggishness in the personal computer market.
"We had a pretty sharp (bond) selloff yesterday, you've got the backdrop of stocks which are a little weaker today on the Microsoft news, (and) you hit some decent technical support levels that we seemed to bounce off of," said Ashok Bhatia, portfolio manager at Strong Capital Management, who oversees $1.7 billion in the firm's Government Securities Fund.
Results from International Business Machines Corp. (IBM) also bruised stock market sentiment after the company said late Thursday that fourth-quarter revenue fell 11 percent from the year-ago period.
In the currency market, the dollar was mixed against the euro and the yen. The euro purchased 88.48 cents, up from 88.10 at yesterday's close. The dollar bought ¥132.60, up from ¥132.55 at Thursday's close.
-from staff and wire reports 
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