Treasury prices fell Friday after oil prices raced past $112 a barrel and as investors considered the possibility of a government shutdown.
The price on the 10-year Treasury note slipped 25 cents per $100 invested in late trading. Its yield, which moves in the opposite direction, rose to 3.58 percent from 3.55 percent late Thursday.
Traders watched as oil prices surged more than 2 percent, fanning inflation fears.
Investors also remain jittery after the European Central Bank raised interest rates to 1.25 percent from 1 percent on Thursday to curb inflation.
"The market is getting concerned we're falling behind the curve on inflation," said Kim Rupert, managing director of global fixed income analysis at Action Economics.
Next week, investors will get a new look at inflation, assuming the government doesn't shut down. A report on import prices is due out Tuesday; the producer price index comes out Thursday; and the consumer price index is released on Friday. If the government shuts down, most economic reports will be suspended. Debt auctions would continue, however.
The Treasury is set of sell $66 billion in new debt next week, which would add supply to the market. The Treasury plans to sell $32 billion in three-year notes on Tuesday, $21 billion in 10-year notes on Wednesday and $13 billion in 30-year bonds on Thursday.
In other trading Friday, the price of the 30-year bond fell 40.62 cents per $100 invested, while its yield rose to 4.64 percent from 4.62 percent late Thursday. The yield on the two-year note also increased to 0.81 percent from 0.78 percent.
In the market for short-term Treasury bills, the three-year T-bill paid a 0.03 percent yield. Its discount was 0.04 percent.