NEW YORK (CNNMoney.com) -- Bonds rallied Wednesday as the latest signs of tame inflation and housing market weakness led traders to wonder about an interest rate cut from the Federal Reserve.
The dollar weakened against the euro and the yen.
"Those inflation numbers take a real weight off," Andrew Brenner, a market analyst at MAN Financial, told Reuters, referring to Tuesday's government report on consumer prices. "And this housing market is not good - that is going to continue to weigh on the Fed."
The benchmark 10-year note rose 8/32, or $2.50 for every $1,000 invested, to yield 4.65 percent, down from 4.69 percent late Tuesday.
The 30-year note gained 16/32, or $5.00 on a $1,000 investment, yielding 4.82 percent, down from 4.85 percent in the previous session. Bond yields and prices move in opposite directions.
The five-year note added 5/32 to yield 4.57 percent. The two-year note rose 2/32 to yield 4.64 percent.
The Labor Department said Tuesday that the Consumer Price Index, the government's main inflation gauge, climbed 0.6 percent in March after rising 0.4 in February. It was the biggest gain in nearly a year, according to the Labor Department.
But core inflation, which excludes volatile food and energy prices, rose only 0.1 percent, below estimates. Economists were looking for a 0.6 percent increase in overall inflation and a gain of 0.2 percent in core inflation, according to Briefing.com.
Bond traders took the numbers to mean the Fed might cut rates later this year, sparking a rush to today's bonds that carry higher rates.
The only economic report of the day was the government's look at oil inventories and refinery output, which sent oil and gas prices lower in futures markets.
In currency trading, the euro bought $1.3584, up from $1.3572 in the previous session. The dollar bought ¥118.60, down from ¥118.83 Tuesday. 
