US bonds post steepest weekly sell-off in two months

Traders in the 10-year bond options pit at the Chicago Board of Trade signal orders.
Frank Polich | Reuters
Traders in the 10-year bond options pit at the Chicago Board of Trade signal orders.

U.S. Treasury debt prices continued their decline after the release of numerous U.S. data points on Friday. The drop marked the market's worst week in two months, as traders who have been rethinking the global interest rate outlook further bailed out of bullish bond bets.

Traders brushed off mild misses on U.S. data on manufacturing and construction spending. The ISM manufacturing index hit 51.5 for the month of April, while construction spending fell 0.6 percent for March.

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Benchmark 10-year Treasury notes traded as high as 2.1209 percent Friday, surpassing an earlier seven-week high of 2.1173 percent. It was most recently around 2.11 percent.

Investors have pared their holdings of U.S. government debt since mid-April, as heavy debt supply and diminished pessimism about Europe reduced the safe-haven allure of Treasurys, German Bunds and British gilts.

"The fundamentals in Europe are turning and there may be an acknowledgement of that," said Jeffrey Rosenberg, chief investment strategist for fixed income at New York-based BlackRock, the world's biggest asset manager. The

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The yield on benchmark 10-year Treasury notes was up 7.5 basis points at 2.119 percent after hitting the highest in nearly seven weeks at 2.124 percent. The 10-year yield booked its biggest weekly rise since early March. The German 10-year Bund yield jumped nearly 21 basis points on the week, the biggest such move since June 2013, according to Reuters data.

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U.S. auto sales data was also released Friday, with General Motors and Ford Motor both reporting stronger-than-expected U.S. auto sales in April on Friday as robust demand for trucks, and crossover and sports utility vehicles kept the industry on track for its best year in almost a decade.

GM sales rose 6 percent, while Ford's were up 5.4 percent. Sales at Fiat Chrysler Automobiles and Nissan Motor increased 5.8 percent and 5.7 percent, respectively, but both results missed expectations.

The U.S. bond market ended April in negative territory, amid a euro zone government bond sell off and the potential of a Federal Reserve interest rate rise.

—CNBC's Fred Imbert and Jenny Cosgrave contributed to this report.