Bonds decline after strong consumer report

NEW YORK (CNNMoney.com) -- Treasury prices declined Friday afternoon after a consumer sentiment report confirmed other recent signs of strength in the economy.

The dollar edged higher against the euro and yen after climbing to a near four-year high against the Japanese currency Thursday when the Bank of Japan held rates steady.

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The benchmark 10-year note fell 7/32, or $2.18 on a $1,000 note, to yield 4.78 percent, up from 4.75 percent.

The 30-year lost 10/32, or $3.12 on a $1,000 note, to yield 4.87 percent, up from 4.84 the previous session. Bond prices and yields move in opposite directions.

The five-year fell 4/32 to yield 4.78 percent, while the two-year note lost two ticks to yield 4.93 percent.

The University of Michigan consumer sentiment index in January rose to 98.0 from 91.7 at the end of December. The index was the highest since January 2004.

Sentiment indexes have traditionally been seen as a gauge of consumer spending, which fuels more than two-thirds of overall economic activity.

The rise in confidence was the latest in a string of solid economic reports that have convinced traders the Federal Reserve probably won't cut short-term interest rates early in 2007.

"The bottom line is that recent data releases have clearly reduced prospects for a slowdown in early 2007 growth," Robert Sinche, head of currency strategy at Bank of America in New York, told Reuters.

"Without some weaker data, that slowdown may not be of a magnitude sufficient to prompt the Fed to enact an insurance policy easing for the foreseeable future, a realization that would likely prompt the markets to continue marking down prospects for Fed rate reduction in 2007," he said.

In currency trading, the euro bought $1.2961, down slightly from $1.2965 late Thursday. The dollar bought ¥121.26, up slightly from ¥121.21 the previous session.

-- from staff and wire reports

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