As inflation fears ease, bond prices rise
Treasurys climb as investors eye falling oil prices and bet that inflation will ease.
NEW YORK (CNNMoney.com) -- Bond prices rose Friday as investors bet that inflation will ebb as oil prices continue to fall.
The benchmark 10-year note added 30/32 to 101 10/32 and its yield fell to 3.84% from 3.89% late Thursday.
The 30-year long bond rose 30/32 to 100 16/32 lowering its yield to 4.47% from 4.53%.
The 2-year note rose 2/32 to 100 22/32 with a yield of 2.39%.
Bond prices were supported by a perception in the market that inflation, which erodes the value of fixed income investments like government-backed Treasurys, will begin to recede.
Friday's advance was a "continuation of the sense that lower oil and commodity prices are going to drive down inflation," said Bob Hennes, managing director of Johnson Illington Advisors LLC. And that will help "head off the necessity for the Fed to raise rates anytime soon."
That same sentiment was apparent on Thursday as bond traders shrugged off a report showing the nation's annual inflation rate surged to 5.6% in July - its highest in 17 years.
Bondholders appeared to focus on the price of oil, which has come down about 33% since touching an all-time trading high of $147.27 a barrel last month.
High oil and gasoline prices have been a major factor in the run-up of consumer prices. Thursday's inflation report showed that energy costs increased by 4% on a monthly basis and nearly 30% annually.
But recent signs of waning global demand have helped push oil and gasoline prices lower as overseas consumers appear to be pulling back.
The European Union's statistics agency said Thursday that the eurozone economy contracted by 0.2% in the April-June period, raising recession fears.
Signs of economic weakness in Europe, the United Kingdom and Japan also helped send the U.S. dollar higher against its major trading partners.
The 15-nation currency slid to $1.4679 in New York from $1.4803 late Thursday. And the British currency retreated to its lowest level since October 2006, sinking to $1.8647 from $1.8685 the previous session. 
