NEW YORK (CNN/Money) -
Treasurys climbed modestly Friday, after reports on consumer confidence and regional manufacturing proved firm but not as strong as many had feared.
At around 4:00 p.m. ET, the benchmark 10-year note rose 7/16 of a point in price to 99-21/32, yielding 4.29 percent from 4.35 percent late Thursday. The 30-year bond gained a solid point at 103-1/2, its yield slipping to 5.13 percent from 5.21 percent from late Thursday. Bond yields and prices move in opposite directions.
Two-year note prices gained 1/16 of a point at 99-19/32 with a yield of 1.84 percent, while the five-year note rose 7/32 of a point to 99-15/32 with a yield of 3.24 percent.
In the currency market, the dollar advanced against both the yen and the euro. The dollar bought ¥110, up from ¥108.74 late Thursday, while the euro bought $1.1581, down from $1.1635 late Thursday.
Neither gains in the Chicago purchasing management index nor improvement in consumer sentiment hurt bonds.
Bonds held gains as the Chicago purchasing management's gauge of business activity bounced to 55.0 in October from 51.2 in September. Forecasts had pegged the figures at 55.5 and many in the market had bet on a reading closer to 60.0.
The University of Michigan confidence barometer for October inched up to 89.6 from an initial reading of 89.4.
The slight gains, in the face of strong data, came as a relief to bond bulls since they had feared a more radical improvement given recent upbeat economic news.
"It's an encouraging sign, but of course we have a long way to go before you would say that the consumer is very optimistic," said Patrick Fearon, economist at A.G. Edwards & Sons in St. Louis.
The breakdown for the Chicago factories report was upbeat with new orders and production jumping while prices paid leaped, perhaps suggesting tentative inflationary pressure. Also, the long struggling jobs index rose sharply, stirring talk that the October payrolls report could show a second month of gains.
"The market's done well so far on short-covering and maybe there's some month-end demand in here as well," said one surprised trader at a U.S. primary dealer.
"Feels like people are still short in anticipation of strong data, but that means the figures have to be really spectacular to justify more selling. Just being super strong doesn't cut it anymore," the trader added.
Spectacular certainly describes Thursday's GDP report which showed growth surged 7.2 percent annualized in the third quarter, the fastest pace in almost 20 years.
But the fallout to bonds from that report was curbed somewhat by a sense that this acceleration was not sustainable and the economy would slow again in coming months. Bond bulls thus seized on figures showing personal spending fell 0.3 percent in September while real spending, adjusted for inflation, fell a hefty 0.6 percent.
Disposable income dropped a sizable 1.0 percent, suggesting the effect of tax cuts was waning and consumption may slow somewhat this quarter.
Traders were relieved that the inflation measures within the data were softer than those in Thursday's GDP report. The core personal consumption expenditures deflator, the Fed's favored inflation gauge, slowed to an annual 1.2 percent in September from 1.3 percent the month before.
-- Reuters contributed to this story.
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