By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) -- Treasury prices were mostly higher on Friday, as concerns about debt problems in Europe kept up the appeal of U.S. debt, though discussions about possible policy responses made for volatile trading.
Yields on benchmark 10-year notes, which move inversely to prices, are on track for the biggest weekly drop since August as concerns about the financial health of Greece and other European nations weighed on stocks and the euro, giving investors dollars to park in the relative safe-haven of Treasurys.
"Markets are in a state of shock here," said Robert Tipp, chief investment strategist at Prudential Fixed Income Management. "In the wake of the European crisis, for investors looking to buy government bonds, the U.S. still looks pretty good."
Yields on 10-year notes (UST10Y 3.39, -0.01, -0.21%) , which move inversely to prices, shed 1 basis point to 3.39%, the lowest level on a closing basis since December. A basis point is 0.01%.
Late Thursday, 10-year yields plunged by the most since July after a still-unexplained plunge in U.S. stock markets.
Yields are down from last Friday by the most since August.
Yields on 2-year notes (UST2YR 0.81, +0.03, +3.45%) increased 2 basis points to 0.82%. On Thursday, they closed at the lowest level since Feb. 5. In the last week, yields have fallen by the most since January.
Bonds had been lower as traders in Asia and Europe sold to lock in the big gains after a stock selloff Thursday.
German officials approved money as part of a rescue package for Greece, and European officials held various meetings to address Thursday's drop in U.S. stocks, which sent the dollar (CUR_EURUSD 1.2722, +0.0093, +0.7364%) to a 14-month high versus the euro. On Friday, benchmark U.S. stock indexes fell more than 2% earlier before retracing losses. Read about U.S. stcoks.
Traders' eyes were still on activity in European markets, with some key votes on Greece's bailout package getting approval, though fears continued that the debt-saddled country's type of fiscal problems could still pressure other nations. The cost to insure debt of some of Europe's peripheral countries rose, according to spreads on credit default swaps, or CDS. Read more on Germany, Greece aid.
"The real issue continues to be Greece even though the German vote affirmed support for the bail out plan, Greek, Spanish, and Portuguese CDS still trades poorly," said Thomas di Galoma, head of U.S. fixed-income-rates trading. "This is extremely positive for U.S. Treasurys."
Playing second fiddle, U.S. payrolls rose 290,000 jobs in April, with about 224,000 coming from private companies. Analysts polled by MarketWatch had expected a total of 185,000 jobs to be added. The unemployment rate rose as more Americans were hopeful enough to re-enter the workforce, Tipp said. Read about U.S. jobs report.
"The takeaway is that the jobs story is improving, people are getting this and reentering labor force, but that wages remain subdued," said strategists at CRT Capital Group.
