NEW YORK —  Treasurys fell Friday after rising oil prices had investors worrying about inflation's impact on fixed-income returns.

Crude prices rose more than $2 a barrel on the New York Mercantile Exchange, while the average retail price of gasoline hovered around $3.77 per gallon. That has raised concerns that consumers and businesses will struggle with higher costs, and that will hurt the overall economy.

Higher inflation makes fixed-income products, like government bonds, less attractive because it could eat into returns.

Bonds had advanced earlier in the session after a report from the University of Michigan that its preliminary gauge of May consumer sentiment came in at a worse-than-anticipated reading of 59.5. The reading was its lowest since 1980, and down from April's reading of 62.6.

Weak readings on the economy tend to lure investors to safer assets like government securities.

The Commerce Department report on the housing market was positive, showing that construction of new homes rose 8.2 percent in April. The jump was the largest monthly advance in more than two years, and came as upbeat news after analysts had predicted a 0.7 percent decline.

However, the rise was due mostly to a surge in apartment construction, which can be volatile.

The benchmark 10-year Treasury note fell 7/32 to 100 7/32 and yielded 3.85 percent, up from 3.82 percent late Thursday, according to BGCantor Market Data. Bond prices move in the opposite direction of yields.

The 30-year long bond fell 14/32 to 97 23/32 and yielded 4.58 percent, up from 4.55 percent late Thursday.

The 2-year note fell 1/32 to 99 12/32, and its yield rose to 2.45 percent from 2.43 percent.

Their yields were unchanged in late trading.

The 3-month Treasury bill's yield was unchanged at 1.83 percent from late Thursday, while its discount rate remained at 1.80 percent.

Treasurys have been bouncing back and forth within a range for about a month. Economic data has been indicating that the economy remains in a downturn, but not a free-fall, with the inflation outlook unclear.

"We keep rotating from top to bottom, bottom to top," said Joel Marver, a Treasury technical analyst at Thomson Financial, noting that trading volumes have been relatively light. "The tendency to hold in a range does indicate uncertainty."

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