NEW YORK (CNN/Money) -
Treasury prices recovered Friday as higher rates enhanced the allure of government debt and strong consumer and housing figures proved unable to boost stock prices.
At around 4:00 p.m. ET, the benchmark 10-year note rose 9/16 of a point to 98-7/8, yielding 4.39 percent, down from 4.67 percent on Thursday. The 30-year bond climbed 3/4 of a point to 100-23/32 with a yield of 5.25 percent, down from 5.29 percent.
The five-year note was 11/32 of a point higher at 99-1/16 with a yield of 3.33 percent, while two-year notes gained 1/8 of a point to 99-17/32 with a yield of 1.87 percent. Bond yields and prices move in opposite directions.
In the currency market, the dollar weakened against both the yen and the euro. The European currency bought $1.1670, up from $1.1594 late Thursday. The yen bought ¥109.41, down from ¥109.87 late Thursday.
Returns on Treasurys have improved significantly after more than two weeks of heavy selling, since the yield on government securities moves opposite to their price.
The sharp move created an opportunity for bargain-hunting traders to start dipping their toes back into bonds. Benchmark yields started the month of October at 3.91 percent, only to reach a six-week high of 4.48 percent Thursday.
A slide in equity markets only reaffirmed investors' predilection for safe-haven Treasury debt.
"We really have given up a lot in price and gained a lot in yield," said Mary Ann Hurley, vice president of fixed-income trading at D.A. Davidson & Co. in Seattle.
"There has been some bottom fishing," she said, adding that "negative stocks certainly are a positive for bonds."
The day's economic reports showed the U.S. housing market remains robust. New housing starts rose 3.4 percent in September to 1.89 million, beating forecasts for a steady 1.82 million and adding to already lofty expectations for growth in last quarter's gross domestic product (GDP).
The University of Michigan consumer sentiment index firmed to 89.4 in October from September's 87.7, topping forecasts for a rise to 88.0.
But analysts said the market had already priced in these kinds of buoyant reports and that investors were ready to take a chance on 10-year yields of 4.40 percent or higher.
"Yields have risen to levels where buyers looking for yields are willing to take a risk and buy," said Gary Thayer, chief economist at A.G. Edwards & Sons in St. Louis.
Third-quarter GDP forecasts for growth of 6.0 percent or higher, as well as upbeat snapshots of regional manufacturing, pushed bond prices lower this week. But at this point, economic reports pointing to stronger growth have become par for the course, analysts said.
The market also took some comfort in figures late Thursday showing foreign central bank holdings of U.S. Treasury and agency debt had topped a cool $1.0 trillion. That was up from $806.68 billion just a year ago and equates to roughly 10 percent of GDP.
In all, the Federal Reserve's custody holdings for offshore central banks jumped $9.38 billion in the week to Wednesday, with Treasurys making up the majority.
The bulk of that demand comes from Asian central banks parking the proceeds from buying dollars to limit export-damaging gains in their currencies and traders were relieved to see that these flows had not slackened despite pressure from the White House to let currencies float freely.
-- Reuters contributed to this story.
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