NEW YORK (CNN/Money) - Treasury prices fell Friday as traders ignored a federal report that showed slowing economic growth and tame inflation and instead focused on a jump in midwest business activity.

The benchmark 10-year note lost 21/32 of a point to 98-25/32, to yield 4.27 percent, up from 4.19 percent late Thursday. The 30-year bond fell 1-8/32 of a point to 113-19/32, to yield 4.47 percent, up from 4.40 percent. Treasury prices and yields move in opposite directions.

In shorter-dated bonds, the five-year note lost 13/32 of a point, yielding 4.12 percent, while the two-year note slipped four ticks, to yield 4.01 percent. Yields on the two-year note haven't crossed the 4 percent mark in over four years.

The Chicago purchasing managers index, or Chicago PMI, stole the spotlight. The index was 63.5 in July, easily topping both economists' expectations of a 55.5 result and June's result of 53.6.

The jump could indicate a rise in inflation, which hurts bonds as it erodes the value of the fixed-income investment. However, rising interest rates generally help the dollar as they make dollar-denominated securities more attractive to foreign investors.

Readings on gross domestic product, the broadest measure of the nation's economy, took a back seat. GDP grew at an annual rate of 3.4 percent in the second quarter, the Commerce Department reported, down from a 3.8 percent growth rate in the first quarter.

Economists surveyed by Briefing.com had a consensus forecast for 3.5 percent growth in the most recent period.

The chain deflator, a measure of prices closely watched by the Federal Reserve and economists, rose at an annual 2.4 percent pace in the quarter, less than a revised 3.1 percent rise in the first quarter and also less than the 2.6 percent increase forecast by economists.

In currency trading, the dollar turned higher, rising against the yen and edging up against the euro. The dollar bought ¥112.48, up from ¥112.15 late Thursday, while the euro bought $1.2128, down from $1.2135.

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