Treasurys pull back as investors rush into stocks

Treasury prices dropped Friday as the falling price of oil sent investors rushing back into the stock market.

The drop in crude to about $115 a barrel, the lowest level since early May, helped ease concerns that consumers, forced to spend more for fuel, would curtail their spending, which accounts for two-thirds of the U.S. economy.

Investors used oil's decline as a reason to get back into the market, driving the Dow Jones industrial average up more than 300 points. That siphoned money out of safe-haven investments like government debt.

"It is pretty clear that when the money travels, it travels back to the equity market whenever it can," said Kevin Giddis, managing director of fixed income at Morgan Keegan. "We're seeing a lot of asset allocation moving back and forth, and right now investors don't need the safety of government bonds."

In afternoon trading, the 10-year Treasury note fell 7/32 to 100 12/32. Its yield was at 3.95 percent compared to 3.93 percent late Thursday, according to BGCantor Market Data. Yields move in the opposite direction from prices.

The 30-year long bond rose 2 to 99 3/32. Its yield rose to 4.56 percent from 4.55 percent Thursday.

The 2-year note fell 6/32 to 100 14/32, and yielded 2.52 percent, up from 2.43 percent.

Earlier during the session, Treasurys moved higher after disappointing earnings results from Fannie Mae triggered worries about the struggling financial sector. There is also growing concern about a military conflict between Russia and Georgia plunging the region into war.

Government debt had been higher most of the week, and was helped by stronger-than-expected demand during auctions for the 10-year and 30-year bonds. The sale of $17 billion of 10-year notes on Wednesday and $10 billion of 30-year notes on Thursday were the biggest in several years, and showed that investors still are in demand of safer securities.

"The auctions were good, and something the market needed to support itself," Giddis said.

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