By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) -- Treasury prices gained slightly on Friday, keeping 10-year yields under 3%, after a report showed U.S. consumer prices fell 0.1% in June.
Yields on 10-year notes (UST10Y 2.98, -0.01, -0.37%) slipped 1 basis point to 2.99%. Bond yields move inversely to prices. A basis point is 0.01 percentage point.
Yields on 2-year notes (UST2YR 0.61, 0.00, 0.00%) were more volatile, recently falling 1 basis point to 0.60%, after touching a new record of 0.57% low this week.
Yields on 30-year bonds (UST30Y 3.98, -0.01, -0.23%) , which are often the most sensitive to inflation risks and expectations, declined 1 basis point to 3.98%, staying below the psychologically important 4% level.
The government report said core inflation, excluding food and energy, rose slightly more than some analysts expected but still remained historically low on a year-over-year basis, a trend more closely watched by policy makers. Read more on CPI.
The Federal Reserve has said it expects inflation to remain benign. But a slowing rate of inflation, called disinflation, is a more problematic concern because it tends to stall economic growth. The Fed has few tools left to combat it since interest rates are already near zero.
The small increases in the CPI compared with a year ago speak to "the deflated inflation forecast the Fed has already espoused; so while friendly, this is more confirmation than new information per se," said strategists at CRT Capital Group.
Treasurys rallied strongly in the past two days as economic data came in weaker than economists anticipated and pointed to more of a slowdown in U.S. growth in the second half of the year. Read Thursday's Bond Report.
