Treasury prices retreated on Friday as an essentially stable reading on US consumer confidence gave bond traders an excuse to sell after a giant rally over the past week.
Benchmark 10-year note yields backed off from an eight-month low of 3.68 percent reached on Thursday, climbing to 3.77 percent as the University of Michigan consumer confidence gauge for March dipped to 94.1 from 94.4 in February. Wall Street had forecast a rise to 95.0
"These confidence surveys are reflecting what people are reading - that the economy is not creating jobs," said Avery Shenfeld, senior economist at CIBC World Markets. "It doesn't mean that people are not spending."
Some traders worried that the bond market had come too far, too fast as a jump in prices after a disappointing US jobs report last week was compounded by a safe-haven bid related to deadly bomb attacks in Madrid on Thursday.
Recovering stock market indexes gave bond investors a further excuse to pare their Treasury holdings.
Traders said some selling in conjunction with corporate deals coming to market also weighed on bond prices.
Two-year notes weakened 3/32, their yields rising to 1.52 percent from 1.46 on Thursday, while five-year notes fell 11/32 in price for a yield of 2.74 percent versus 2.64 percent.
Thirty-year bonds were down almost a full point for a yield of 4.72 percent from 4.66 percent.
Treasuries took a small knock from data earlier that showed the US current account deficit contracted more than expected in the last quarter of 2003, which helped the dollar firm against other major currencies.
The Commerce Department reported the current account deficit, the broadest measure of US trade with the rest of the world, dropped to $127.5 billion in the fourth quarter from a revised $135.3 billion in the third quarter.
A stronger dollar would suggest less need for intervention by Asian central banks, which have sought to stem the greenback's slide against their own export-sensitive currencies through dollar purchases that are later invested in US debt.
So far, however, the idea that this cycle would somehow come to an end has proved unfounded. Foreign central bank holdings of US debt hit a new record in the latest week, figures from the Federal Reserve showed on Thursday.
The Fed said its total holdings of Treasury and agency debt kept for central banks abroad rose $6.22 billion to $1.165 trillion in the week ended March 10. It was the 20th straight week that purchases of Treasury and agency paper have climbed.
Since the year began, total holdings of Treasury and agency debt have surged more than $92 billion, having already climbed by $217 billion in 2003.
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