NEW YORK (CNN/Money) - Treasury prices sank Friday, pushing the yield on the 10-year note back above 4 percent, as traders further digested Fed Chairman Alan Greenspan's remarks on the economy and Friday's news on the nation's trade deficit.

The dollar climbed against the euro and the yen.

The benchmark 10-year note tumbled 25/32 of a point to 100-19/32 to yield 4.05 percent, up from 3.95 percent late Thursday.

The 10-year yield has hovered near 14-month lows for most of June as traders pushed prices up -- and yields down -- on hopes that the Federal Reserve would soon end its monetary tightening campaign. Treasury prices and yields move in opposite directions.

The 30-year bond plunged 48/32 to 116-7/32 to yield 4.32 percent, up from 4.24 in the previous session.

The five-year note dipped 13/32 of a point to yield 3.84 percent, while the two-year note fell 4/32 to yield 3.70 percent.

The sell-off in bonds came after Greenspan's testimony to Congress, in which he stressed that the economy was on "firm footing" and suggested that the central bank would maintain its "measured" pace of interest rate hikes.

"Despite some of the risks that I have highlighted, the U.S. economy seems to be on a reasonably firm footing, and underlying inflation remains contained," Greenspan told the congressional committee Thursday.

Speaking to bankers at a conference in Beijing via satellite earlier in the week, the Fed chief left the door open to the possibility of a pause in rate hikes.

In a bid to ward off inflation, the Fed has raised its overnight bank lending rate eight times since last June to 3 percent. Treasury speculators fear inflation because it erodes the value of their fixed-income investment.

Other Fed officials have suggested recently that the central bank may be nearing the end of its rate-raising cycle, remarks that had give a new leg to the long bond market rally.

Adding to speculators' concern was Friday's trade deficit report, which also hinted that the economy is on solid footing.

The trade deficit widened to a less-than-expected $57 billion in April, but both exports and imports set records. The March trade gap figure was also revised downward.

The results suggested to analysts that U.S. growth might have to be adjusted upward, and that inflationary pressures may emerge.

"It is too early to suggest the deficit has peaked but it fits with Greenspan's views of the early signs of stabilization," Alan Ruskin, a research director at 4CAST Ltd. in New York told Reuters.

Looking ahead to next week, traders are expected to carefully watch two inflation readings -- Tuesday's producer price index and the consumer price index due Wednesday -- as well as reports on housing starts and the current account.

In currency trading, the dollar gained against the euro and the yen.

The euro bought $1.2118, down from $1.2220 in the previous session, while the dollar bought ¥108.59, up from ¥107.49 late Thursday.

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