Bonds Reverse Earlier Slide to Trade Nearly Flat
U.S. Treasurys were flat to slightly higher Friday as investors took a break from recent selling that has been based on rising expectations of climbing inflation amid soaring oil prices and a falling dollar.
Bond prices have been hammered this week after the Federal Reserve cut benchmark interest rates by 50 basis points on Tuesday in an effort to stave off any impact on economic growth from a liquidity crunch in credit markets.
The benchmark 10-year note is on track for its biggest weekly jump in yields in over three years, while the yield curve, a measurement of the spread between 2-year note yields and 10-year note yields, was its widest since the spring of 2005. Bond yields move inversely to prices.
Bonds pared early gains Friday after Fed Vice Chairman Donald Kohn again raised the specter of rising inflation. "One reason I can see for the selling is that Kohn expresses concern about price expectations, and is looking for better ways to anchor them," said T.J. Marta, strategist with Royal Bank of Canada Capital Markets in New York.
Benchmark 10-year notes were 2/32 higher in price for a yield of 4.69 percent from 4.70 percent late Thursday.