NEW YORK: US Treasuries prices fell on Friday as an upbeat report on US consumer sentiment and less dire data on inflation sparked profit-taking on recent gains tied to fears about deflation in Europe and a surprise policy move by the Swiss central bank.
The US government debt market came off five days of gains linked to safe-haven demand that had sent the 30-year bond yield to a series of record lows.
A small rebound in slumping oil prices also helped reduce worries the US economic expansion could be disrupted by the huge recent fall in crude, causing some investors to scale back Treasuries holdings.
"We are seeing some profit-taking after the dramatic drop in yield this week," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia. "We have a day when traders are burned out."
That view emerged a day after the Swiss central bank dumped a three-year old currency cap versus the euro and cut interest rates deeper into negative territory.
The Swiss National Bank's stunning move roiled financial markets worldwide and stoked speculation that it acted pre-emptively before the European Central Bank possibly announces a massive bond purchase program next Thursday in a bid to stem deflation from spreading across the euro zone. "The ECB is the biggest market catalyst in my view," LeBas said.
Until then, traders were reluctant to build bets before a three-day weekend.
The US bond market will be closed on Monday for the Martin Luther King holiday, analysts and traders said.
Friday's below-average trading volume exacerbated the wild swings in prices.
In the futures market, some traders cited computer-driven funds for some of the selling.
The 30-year bond was up nearly 1-1/2 point in early US trading and down as much as 1 point by early afternoon.
Benchmark 10-year Treasury notes were down 10/32 in price with a yield of 1.812 percent, up 4 basis points from late on Thursday. It was on track to fall 16 basis points for the week, raising its month-to-date drop to 36 basis points.
The 10-year yield rose as high as 1.831 percent during the height of the sell-off in the wake of a report from the University of Michigan that showed US consumer sentiment climbed to strongest level in 11 years in early January.
Earlier, it touched a 20-month low of 1.698 percent on news the US consumer price index fell 0.4 percent in December for the biggest decline in six years. However, the reading didn't fall as much as some traders had expected.
The 30-year bond was down 16/32 in price with a yield of 2.433 percent, up 2 basis points from late on Thursday. It hit a record low for a third day at 2.350 percent.
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