Longer term debt falls on signs of stability

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NEW YORK (CNNMoney.com) -- Longer dated Treasurys were lower Friday, even as shorter maturity debt held mostly unchanged, after better-than-expected reports on manufacturing and consumer sentiment curbed demand for safe-haven assets.

The Institute for Supply Management's manufacturing index rose to 40.1 in April from 36.3 in March versus forecasts for a rise to 38.4. Any reading under 50 indicates the sector is contracting, but the report contained signs the decline in manufacturing is slowing.

Separately, the University of Michigan's consumer sentiment index was revised up to 65.1 from a previous reading of 61.9. Economists thought it would hold steady.

"There are a number of signs that suggest that investors are...getting more comfortable taking additional risk to achieve a higher return," said Kevin Giddis, head of fixed income sales at Morgan Keegan, in a research note.

Supply concerns also weighed on the market.

The Treasury is set to auction $71 billion in U.S. debt next week, beginning with a $35 billion offering of 3-year notes Tuesday. The government will also auction 10-year notes and 30-year bonds next week, after selling $101 billion worth of Treasurys in three offerings this week.

The auctions come at the same time the government seeks to fund its various economic stimulus and financial rescue plans. As the government floods the market with supply, many bondholders worry that prices will continue to fall.

Still, analysts said Treasurys could be boosted by concerns about the banking sector.

The government is set to release the results of the so-called "stress tests" it conducted on the nation's biggest banks on May 7. The aim is to determine which banks are healthy enough to survive another financial shock and which could require more support.

Bond prices: The benchmark 10-year note was down 8/32 to 96-21/32, and its yield rose to 3.16% from 3.12% late Thursday. Bond prices and yields move in opposite directions.

The 30-year bond tumbled 13/32 to trade at 90-7/32, and its yield rose to 4.07% from 4.04%.

The 2-year note was flat at 99 30/32, and its yield was 0.92%.

The yield on the 3-month rose to 0.15% from 0.14%.

Meanwhile, lending rates were mixed. The 3-month Libor fell to 1.01% from 1.02% Thursday, according to Bloomberg.com. The overnight Libor rose to 0.24% from 0.23%.

Libor, the London Interbank Offered Rate, is a daily average of rates that 16 different banks charge each other to lend money in London.