Treasury prices rise as inflation fears wane

AP News
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Posted: May 13, 2011 5:29 PM
Treasury prices rise as inflation fears wane

Treasury prices rose Friday after a government report showed that inflation remains tame.

The price of the 10-year Treasury note rose 43 cents per $100 invested late Friday. Its yield, which moves in the opposite direction, fell to 3.17 percent from 3.23 percent late Thursday.

The Labor Department said consumer prices rose 0.4 percent last month largely due to higher food and energy prices. That fell in line with economists' expectations. Excluding food and energy, prices rose a mere 0.2 percent and stayed below the rate of inflation that the Federal Reserve considers normal.

As the economy recovers, bond traders have been worrying about higher inflation. The central bank typically raises interest rates if it expects prices to rise too quickly.

Bonds also got a boost when investors sold stocks after European officials said the bailouts of Greece, Ireland and Portugal will be larger than expected. The news renewed fears that the financial crisis there is getting worse.

In other trading, the price of the 30-year Treasury bond rose 90 cents per $100 invested, while its yield fell to 4.31 percent from 4.35 percent late Thursday. The yield on the two-year note was unchanged at 0.55 percent.

The yield on the three-month T-bill was unchanged at 0.01 percent. Its discount was 0.02 percent.