NEW YORK (CNNMoney.com) - Treasury prices climbed Tuesday following a tamer-than-expected inflation reading and a sign of weakness within the housing sector.

The dollar slipped against the euro and the yen.

The 10-year Treasury note gained 14/32 to 100-02/32 to yield 5.10 percent, down from 5.15 Monday.

The 30-year bond added 26/32 to 89-7/32, yielding 5.21 percent, down from 5.27 in the previous session. Bond prices and yields move in opposite directions.

The five-year note rose 7/32 to yield 4.98 percent, while the two-year note rose one tick, yielding 4.95 percent.

Treasury prices gained after the Labor Department reported U.S. producer prices climbed 0.9 percent in April, but with volatile food and energy prices stripped out, it a less-than-expected 0.1 percent. (Full story)

The report helped relieve bond traders' inflation fears, which have been sparked by the rising cost of such commodities as oil and gold.

"The fear of an ugly inflation surge is alleviated," Christopher Low, FTN Financial's chief economist, in New York, told Reuters.

Treasury investors fear inflation since it erodes the value of the fixed-income investment.

Investors also digested the Census Bureau's housing starts report which came in at an annual pace of 1.85 million in April, compared with revised March rate of just under 2.0 million. Economists surveyed by Briefing.com had forecast a 1.95 million pace in April. (Full story)

The weaker-than-expected housing starts figure and the lower than expected inflation reading may fuel investor hopes that Federal Reserve will pause or end its monetary tightening campaign.

The Federal Reserve raised interest rates to 5 percent last week, and left open the possibility it could raise rates again when it meets in June.

If the Wednesday's consumer price index, which gauges inflation in consumer goods, is also tame, the could fuel speculation that the central bank will take a break from its rate hike campaign at its next meeting.

"If it does, it gives credibility to the idea that the Fed can pause with the federal funds rate at 5 percent, its current level," Low told the news service.

In currency trading, the euro bought $1.2858, up from $1.2797 Monday. The dollar traded at ¥109.72, down from ¥110.32 in the previous session.

--from staff and wire reports

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