NEW YORK (CNNfn) - Treasury bonds rose nearly a point Friday after a report showing strong productivity growth in the third quarter eased fears the Federal Reserve will hike interest rates next week.
The Labor Department's quarterly tally of non-farm worker productivity surged 4.2 percent, a sign that the economy is performing efficiently without inflation. Further, unit labor costs rose a mere 0.6 percent in the period.
"There's no inflation," said Richard Yamarone, senior economist at Argus Research.
Bond investors apparently agreed. Just before 9:10 a.m., ET, the price of the benchmark 30-year Treasury bond rose 24/32 to 101-7/32. Its yield, which moves inversely to the price, fell to 6.03 percent from 6.09 percent Wednesday. (The bond market was closed for Veterans Day).
In the day's other economic indicator, retail sales were unchanged in October, meeting analysts' expectations. Sales excluding autos climbed 0.5 percent.
Ian Shepherdson, chief U.S. economist at High Frequency Economics, called this a neutral report for the Fed.
Still, Argus' Yamarone sees the nation's central bank hiking interest rates when it meets Tuesday, based mostly on fears that a tight labor market eventually will stoke inflation. Unemployment in October fell to a near 30-year low of 4.1 percent.
The Federal Open Market Committee, which decides the direction of U.S. monetary policy, left rates its main lending rate unchanged at 5.25 percent at its Oct. 5 meeting. But the committee warned that members are leaning toward lifting rates again should inflation appear to threaten the near-record economic expansion.
Since then, a series of weakening data including housing starts, auto sales and factory orders have convinced some that the Fed doesn't need to raise rates.
But a report this week showing core producer prices rose at greater-than-expected rate last month rekindled inflation fears..
The dollar rose strongly against the euro Friday, but was little changed against the yen.
In an e-mail to clients, Donaldson Lufkin & Jenrette blamed the euro's fall on a weak German retail sales report, which caused concern over the economic health of the region's largest economy.
September sales dropped a real 2.7 percent on the year and 4.3 percent on the month due to weaker storeroom floor sales of furniture, clothing and other non-food items, including a strong drop in catalogue sales.
It cost $1.0302 to buy one euro, down from $1.0407 Thursday, a 1.01 percent rise in the dollar's value.
The yen, meanwhile, was at 104.89 per dollar, little changed from Thursday's 104.99.