Bonds surge after inflation report

NEW YORK (CNNMoney.com) -- Bond prices jumped Monday after the release of a better than expected personal income report, which also showed an improved inflation reading.

The dollar fell against the euro and the yen.

The benchmark 10-year note rose 17/32, or $5.31 on a $1,000 note, to yield 4.63 percent, down from 4.70 percent in the previous session.

The 30-year bond gained 1-3/32, or $10.94 for every $1,000 invested, yielding 4.81 percent, down from 4.87 percent late Friday. Bond yields and prices move in opposite directions.

The five-year climbed 10/32 to yield 4.51 percent, while the two-year note rose one tick to yield 4.60 percent.

A key inflation measure known as the core PCE price deflator, which measures the prices paid by individuals for goods other than food and energy, was up 2.1 percent over the past 12 months, compared to a 2.4 percent rise over the previous 12 months, according to the Commerce Department.

The Federal Reserve is widely believed to want to see the core PCE reading come in at an annual increase of between 1 and 2 percent.

Personal income rose 0.7 percent in March, unchanged from February's revised income gain of 0.7 percent, which was up from the original report that showed a 0.6 percent gain. Economists surveyed by Briefing.com had forecast only a 0.5 percent rise in that measure.

Spending by consumers increased 0.3 percent in March, down from the revised 0.7 percent rise in February. Even that modest increase was attributable to higher prices; controlled for inflation spending actually slipped 0.2 percent. Economists also had forecast a 0.5 percent rise in spending.

The euro bought $1.365, up from $1.3641 in the previous session. The dollar tumbled to an all-time low against the euro Friday, reaching $1.3682, after a weak reading on economic growth.

The dollar fell against the yen as the greenback bought ¥119.47, down from ¥119.58 the previous session.