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NEW YORK (CNN/Money) -
Treasury prices fell and the dollar was mixed Friday as traders pulled back from a three-day rally and bet on higher interest rates.
The benchmark 10-year note lost 7/32 to 100-1/32 to yield 4.49 percent, up from 4.46 late Thursday. The 30-year bond fell 19/32 to 110-3/32 to yield 4.68 percent, up from 4.65 in the previous session. Bond prices and yields move in opposite directions.
In shorter-dated debt, the two-year note slipped one tick, yielding 4.39 percent. The five-year note lost 4/32, yielding 4.42 percent.
With no major economic reports Friday, investors reflected on Thursday's economic news, which contained mixed messages for government debt.
Housing starts fell 5.6 percent in October, declining to a 2.014 million unit annual rate, slower than the 2.070 million unit pace expected by Wall Street economists. A drop in permits for new construction was the largest in more than six years.
But separate reports were less friendly to Treasuries, showing a sharp drop in the number of workers filing for initial jobless aid last week and solid growth in the industrial sector during October.
Claims slipped by 25,000 to 303,000 last week, from an upwardly revised 328,000 the prior week, while industrial output expanded 0.9 percent, in line with forecasts.
And with little economic data set for release next week due to the Thanksgiving holiday, traders saw little reason to bet bond prices would continue to post the gains they have over the last three days, which have pushed yields to the lowest level in nearly a month.
"Without the benefit of data or issuance, the impetus to extend those gains is limited," David Ader, U.S. government bond strategist at RBS Greenwich, told Reuters.
Investors are still counting on at least another two interest rate hikes in December and January.
The Federal Reserve's 16-month credit-tightening campaign, taking the central bank's key short-term interest rate to 4 percent from 1 percent, has drawn more investors to the dollar and Treasury bonds. Several economists see the fed funds rate, an overnight bank-lending rate, rising to at least 4.5 percent next year.
While higher interest rates generally support the dollar, bonds in the secondary market often sell off as newer issues will yield higher rates. And if the economy looks to be in pretty good shape, there is less incentive to buy safe-haven Treasuries.
In currency trading, the dollar was mixed against the euro and yen. The euro bought $1.1768, up from $1.1757 late Thursday. The dollar bought ¥119.13, up from ¥118.69 in the previous session.
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