NEW YORK (CNN/Money) - Treasury bonds edged lower Friday but ended off their lowest levels of the session as investors bet that record oil prices might end up slowing economic growth.

The dollar dropped sharply against the euro and dipped against the yen.

The benchmark 10-year note slipped 2/32 to 100-12/32 to yield 4.08 percent, up from 4.07 percent late Thursday.

The 30-year bond lost 2/32 to 115-15/32 to yield 4.37 percent, up from 4.36 the previous session. Treasury prices and yields move in opposite directions.

The five-year note fell 3/32 to 98-29/32 to yield 3.87, while two-year notes fell one tick to yield 3.71 percent.

Treasury prices gained support Friday afternoon as crude oil prices rallied to reach $58.60, its highest level since April. The data was interpreted as positive for bonds as investors reasoned that high energy prices would put a dent in economic growth.

"Oil is starting to creep back into the back of people's minds as a potential restraint on the economy," Alan De Rose, a trader at CIBC World Markets, told Reuters.

Bonds fell Friday morning after the University of Michigan's preliminary June consumer sentiment survey came in higher than expected, suggesting strong economic growth and a possible pickup in inflation.

Bond investors fear inflation since it erodes the value of their investment.

The dollar slumped against the euro after the current account deficit report Friday morning showed a jump to a record $195.1 billion for the first quarter and the fourth-quarter figure was revised upward, but bond investors showed little reaction.

In currency trading, the euro surged against the dollar, buying $1.2284, up from $1.2101 late Thursday.

"Probably the main implication (of the deficit report) is that it does put some down pressure on the U.S. dollar," Patrick Fearon, senior economist at A.G. Edwards & Sons, told Reuters. "However, recently that pressure has been offset by the Fed's interest rate hikes, and that could continue," he added.

Next week, investors are expected to eye homes sales figures and durable goods orders for May, both due late next week. On June 29-30, the Federal Reserve is scheduled to convene for their monetary policy-setting meeting.

The dollar fell against the yen, fetching ¥108.52, down from ¥108.96 the previous session.

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-- from staff and wire reports