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US Bonds Near Flat on Cyprus Uncertainty

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Prices for U.S. Treasurys traded flat on Friday as a bailout for Cyprus remained in doubt going into the weekend, leaving investors uncertain about the country's future in the euro zone.

Cyprus was just hours away from a deal on Friday to raise billions of euros and unlock a bailout from the European Union that could avert financial meltdown and exit from the euro, its ruling party said.

The remarks came after Moscow had rebuffed requests from Nicosia for assistance, in a week in which a proposal for a tax on Cypriot bank accounts roiled global markets.

(Read More: S&P Cuts Rating on Cyprus by One Notch to Triple-C)

"It's an extremely low-volume day," said David Ader, head of government bond strategy at CRT Capital Group in Stamford, Connecticut. "The reality is there's not a lot of stuff that's germane or relevant to Treasurys or Treasurys alone... We're just kind of here and waiting."

Ten-year Treasurys last traded down 2/32 in price to yield 1.920 percent.

The notes have traded at yields of between 1.90 and 1.97 percent this week after falling from around 2.06 percent last week.

The 30-year bond also traded down 2/32 in price to yield 3.137 percent.

Fears that Cyprus' problems could be replicated in other euro zone countries including Spain and Italy pushed Treasurys yields down this week, despite improving U.S. economic data that had led some market participants to position for higher yields.

Traders are now questioning whether further volatility in the euro zone will push benchmark Treasurys again below the 1.90 percent level, or if a resolution to Cyprus' problems will bring attention back to the U.S. economy and send yields back above 2 percent.

"Overall, guys aren't really quite sure which way the market is going to break," said Sean Murphy, a Treasurys trader at Societe Generale in New York.

(Read More: Are Markets Too Complacent Over Cyprus?)

"There is a good pull for higher rates, and there is a stubborn crowd saying it's the same old story and we're in a low-rate environment for a while. It's choppy enough that you're not getting enough on the data front to really convince you to break out one way or another," he said.

Investors are scrutinizing data for signs of an improving employment picture, which is seen as key for the Fed to end its ongoing bond purchase program.

The Fed bought $3.68 billion in debt due 2018 and 2020 on Friday as part of this effort.

Most economists expect the Fed to end or taper purchases at the end of the year.

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