NEW YORK: US Treasuries prices rose on Friday as lower prices and the highest yields in more than 2-1/2 months attracted buyers.
The euphoria that caused riskier assets to rally in the previous session on Europe's new strategy to contain its debt crisis cooled, giving safe-haven US debt a bit of support.
US Treasuries reached their best levels after an auction of Italian government debt suggested the euro zone rescue deal had not restored investor appetite for Italian debt.
But mainly, analysts said, the recent sell-off in the Treasury market propelled by improved US economic data and stock market gains, had finally brought Treasury prices down low enough, and yields high enough, to attract some buyers.
"Treasuries had sold off pretty aggressively since the end of September and selling had a real exclamation point yesterday on the news of the European plans so, relative to the overall economic and policy backdrop, we hit a value point that brought buyers back into the market," said Robert Tipp, chief investment strategist for Prudential Fixed Income with $240 billion in assets under management.
Benchmark 10-year Treasury notes rose 25/32 on Friday, their yields easing to 2.31 percent from 2.40 percent late on Thursday.
Thirty-year Treasury bonds, which fell more than four points on Thursday, climbed 1-18/32 points on Friday, their yields falling to 3.38 percent from 3.46 percent late on Thursday.
Thursday's rise in yields, which lured buyers on Friday, was the sharpest jump in 2-1/2 months.
But the lack of profit-taking in the stock market on a day following a huge rally lent credence to the idea that Europe could implement its rescue plan. Two major stock indexes ended higher and one slightly lower.
That, with recent evidence of US economic growth, limited the bond market's bounce from its nearly month-long sell-off.
"US economic numbers, while not great, have gotten better and yesterday's Q3 GDP report just validated that growth has accelerated," said Cary Leahey, managing director and senior economist at Decision Economics in New York.
On Friday, the government reported a 0.6 percent jump in US consumer spending during September, boding well for fourth quarter economic activity.
"What recession?" said Chris Rupkey, chief financial economist at Bank of Tokyo/Mitsubishi UFJ in New York. "This (spending jump) puts GDP growth in a good position to follow-up on the third quarter's 2.5 percent growth.
"The risk is Q4 could be a blow-out quarter for GDP growth on the upside, especially if car sales move up closer to 13.5 million," he said.
Monetary policy could also offer more support to the economy, helping riskier assets like stocks at the expense of safe-haven US government debt.
The Fed's preferred inflation measure, the core personal consumption expenditure (PCE) deflator, stood at just 1.6 percent year-on-year in September, according to a government report released on Friday.
"The Fed will take the view that inflation is under control and may take fresh measures to aid the economy," Rupkey said.
Such measures could include an announcement at next week's policy meeting that the Fed will buy mortgage-backed securities outright to aid the housing market and help bring down 30-year mortgage yields, he said.
Others thought such a move was not imminent.
"We believe the (Fed's Federal Open Market) Committee will weigh its options for further policy accommodation, but there will be no major changes at this time," said Joseph LaVorgna, chief US economist at Deutsche Bank Securities in New York.
Data also showed consumer spending grew in September. Though a simultaneous decline in personal savings cast doubt on whether the spending was sustainable, Rupkey argued that spending in one quarter becomes income in the next.
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