Treasurys rise on economic reports

NEW YORK (CNNMoney.com) -- Treasurys were higher Friday after a government report showed spending by individuals remained weak last month and a key measure of inflation held steady.

The Commerce Department report found consumer spending in February increased 2% over the same period last year, excluding food and energy costs.

That is in line with the Federal Reserve's perceived comfort zone of 1% to 2% annualized price increases, suggesting that the central bank's rate cuts have not caused inflation to spiral out of control, as some economists had feared.

The central bank cuts rates in order to boost the economy and, in this round, stave off a recession. But lower interest rates can also weaken the dollar, sending inflation higher.

"Treasurys are up because we saw some tamed inflation, which is positive for the bond market," said Avalon Partners chief market economist Peter Cardillo.

But the government report also showed that already anemic spending by individuals remained unchanged from the previous month at 0.1%, in inflation-adjusted dollars.

"The market is also focused on low consumer spending, which is going to continue to weigh on economy," Cardillo added. "Investors are flocking to bonds as a safe haven."

Stocks swung up early Friday after falling for the second day in a row Thursday.

The benchmark 10-year Treasury note rose 11/32 to 100 1/32, and yielded 3.49%, down from 3.52% late Thursday. Prices and yields move in opposite directions.

The 2-year note down slightly from Thursday's close, at 100 2/32, with a yield of 1.71%, up from 1.70% late Tuesday.

Longer-term bets also saw a rise in demand. The 30-year long bond rose 26/32 to 100 13/32, with a yield of 4.35%, down from 4.38%.