Bonds pare gains after strong home sales

NEW YORK (CNNMoney.com) -- Bond rose but then pared gains Friday after reports showed strong home sales and durables.

The dollar eased against the euro and was little changed against the yen.

The yield on the closely watched three-month Treasury bills, which have been the focus of the market this week, rose to 4.25 percent from 3.93 percent the previous session, suggesting that investors were no longer looking to the shorter-dated securities for safety.

The 10-year benchmark note gained 11/32 to yield 4.61 percent, down from 4.64 late Thursday. Bond prices and yields move in opposite directions.

The two-year bond was down 1/32, yielding 4.29 percent. The five-year note gave up early gains, reaching a 4.41 percent yield.

The 30-year note rose 32/32 to yield 4.89 percent, down from 4.94 in the previous session.

In economic news, July new home sales rose 2.8 percent to an 870,000 annual sales pace, beating forecasts for a drop to 825,000.

A surprisingly strong durable goods order reading, which surged 5.9 percent during the month of July, topped expectations.

Investors have recently fled to government debt, which has offered shelter amid the market's recent turbulence.

The credit squeeze has prompted Wall Street to call on the Federal Reserve for help. The central bank has cut the discount rate, or the rate at which it lends directly to banks, but has refrained from cutting the key federal funds rate, which directly impacts consumer lending rates.

The nation's four biggest banks, including Citigroup (Charts, Fortune 500), Bank of America (Charts, Fortune 500), JP Morgan Chase (Charts, Fortune 500) and Wachovia (Charts, Fortune 500), said they borrowed a combined $2 billion from the Fed in an effort to remove the stigma of getting short-term financing at the discount window. All four banks emphasized they have access to cheaper funds.

In currency trading, the dollar edged up slightly against the yen, trading at ¥116.43, from ¥116.06 Thursday, while the euro bought $1.368, up from $1.356 Thursday.