Bond prices slide on strong manufacturing data

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NEW YORK (CNNMoney) -- Treasury prices declined sharply Friday as bond investors reacted to a better-than-expected report on U.S. manufacturing.

The price on the benchmark 10-year note edged lower, pushing its yield to 3.20%, up from Thursday's yield of 3.14%.

Friday's losses continue what has been a sharp decline in Treasury prices in the past week, as investors have worked through several economic reports indicating that the U.S. economy may not be slowing down as much as had been previously expected.

"Investors have whiplash from how quick the sentiment changed in the market," said Robert Tipp, chief investment strategist at Prudential Fixed Income.

Bonds: It's a seller's market

That positive sentiment was reinforced Friday after Wall Street got the Institute for Supply Management's manufacturing index for June, which rose to a more-than-expected reading of 59.9. Economists had been expecting a read of 51.1. Stocks rallied on the news, with the Dow rising more than 100 points.

Bond investors continue to expect that yields will continue to climb higher in the short term, but the pace of which yields may rise should slow.

"We were pretty overbought last week, but this sell-off has been too quick," said Kim Rupert, fixed income analyst with Action Economics. "The bias for yields is higher as long as the data continues to show the recent slowdown was transitory."

The economic data was combined with the news earlier this week that Greece reached an agreement with the European Union and the International Monetary Fund.

"Regardless if Greece makes it or not, it was an impressive feat that the EU was able to get this done despite the difficult politics and economics involved," Tipp said.

Over the next several weeks, the ongoing debate over the United States' debt ceiling will keep Treasury prices volatile, Rubert said. Next week's jobs report will also be closely watched.

"The debt-ceiling debate will be the undercurrent in the Treasury market for the foreseeable future," she said.