NEW YORK: US Treasury debt prices gained on Friday as stocks weakened in choppy trading, and as bonds were also helped by the weight of new Treasury supply this week being lifted from the market.
Stocks fell after rallying for the past five sessions on hopes of a resolution in the US-China trade dispute and assurances from the Federal Reserve that it would be patient on interest rate hikes.
Bonds have benefited from safety buying in recent months when stocks fall.
"Stocks are a little weaker. They really have dictated the direction of Treasury trading for a while now," said Thomas Simons, a money market economist at Jefferies in New York.
The US Labor Department said on Friday its Consumer Price Index dipped 0.1 percent last month amid a plunge in gasoline prices, though underlying inflation pressures remained firm as rental housing and healthcare costs rose steadily.
Bonds were further aided by the completion of $78 billion this week in new coupon-bearing Treasury supply, which has weighed on longer-dated bonds.
Benchmark 10-year notes gained 10/32 in price to yield 2.697 percent, down from 2.731 percent late Thursday.
Yields have risen from one-year lows reached a week ago on improving risk appetite since Federal Reserve Chairman Jerome Powell said on Friday that he was aware of the risks of an economic slowdown and that the US central bank will be patient and flexible in policy decisions this year.
Powell on Thursday stressed again that the Fed can be patient in approving any further rate increases, saying that "especially with inflation low and under control, we have the ability to be patient and watch patiently and carefully."
The yield curve also steepened after minutes from the Fed's December meeting, released on Wednesday, showed that a range of policymakers said they could be patient about future rate increases and a few did not support the bank's rate hike that month.
Trade talks between the United States and China and the ongoing partial US government shutdown remain headwinds for markets.
A trade deal with China could be significant, if reached. "If we get some indication of progress on that front that could really open things up, it could have a pretty dramatic impact on the inflation environment and change expectations for the Fed too," Simons said.
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