NEW YORK (CNN/Money) - Treasury prices retreated Friday as an essentially stable reading on U.S. consumer confidence gave bond traders an excuse to sell after a giant rally over the past week.
Benchmark 10-year note yields moved off an eight-month low of 3.68 percent reached on Thursday, climbing to 3.7 percent as the University of Michigan consumer confidence gauge dipped to 94.1 from 94.4 in February.
The market's consensus forecast was for a rise to 95.0
The 30-year bond dropped 30/32 to 109-30/32 to yield 4.72 percent, up from 4.67 percent late Thursday. The two-year note fell 3/32 to 100-6/32 to yield 1.52 percent and the five-year note shed 10/32 to 99-16/32 to yield 2.73 percent.
In the currency market, the dollar gained against the euro but stood unchanged against the yen. The euro bought $1.2226, down from $1.2336 late Thursday. The Japanese yen bought ¥110.90, unchanged from Thursday.
"These confidence surveys are reflecting what people are reading -- that the economy is not creating jobs," said Avery Shenfeld, senior economist at CIBC World Markets. "It doesn't mean that people are not spending."
Some traders worried that the bond market had come too far, too fast as a jump in prices after a disappointing U.S. jobs report last week was compounded by a safe-haven bid related to deadly bomb attacks in Madrid on Thursday.
The blasts on packed commuter trains killed almost 200 people and injured some 1,500, reigniting fears of attacks on U.S. interests from Islamist extremist groups, leading many investors to opt for the safety of government debt.
Recovering stock market indexes gave bond investors a further excuse to pare their Treasury holdings.
Traders said some selling in conjunction with corporate deals coming to market also weighed on bond prices.
Treasurys took a small knock from data earlier that showed the U.S. current account deficit contracted more than expected in the last quarter of 2003, which helped the dollar firm against other major currencies.
The Commerce Department reported the current account deficit, the broadest measure of U.S. trade with the rest of the world, dropped to $127.5 billion in the fourth quarter from a revised $135.3 billion in the third quarter.
A stronger dollar would suggest less need for intervention by Asian central banks, which have sought to stem the greenback's slide against their own export-sensitive currencies through dollar purchases that are later invested in U.S. debt.
So far, however, the idea that this cycle would somehow come to an end has proved unfounded. Foreign central bank holdings of U.S. debt hit a new record in the latest week, figures from the Federal Reserve showed Thursday.
The Fed said its total holdings of Treasury and agency debt kept for central banks abroad rose $6.22 billion to $1.165 trillion in the week ended March 10. It was the 20th straight week that purchases of Treasury and agency paper have climbed.
Since the year began, total holdings of Treasury and agency debt have surged more than $92 billion, having already climbed by $217 billion in 2003.
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