NEW YORK: US Treasury yields fell and held near session lows on Friday after Federal Reserve Chair Janet Yellen gave mildly hawkish comments on a potential interest rate increase this year and as investors bought bonds ahead of month-end rebalancing.
Investors covering short positions and month-end demand sent yields lower, retracing some weakness from Thursday when the Treasury saw tepid demand for an auction of seven-year notes.
"Month-end is on Tuesday and there's a fairly large index extension," said Daniel Mulholland, head of Treasuries trading at Credit Agricole in New York.
US benchmark 10-year Treasury notes were last up 9/32 in price to yield 1.96 percent, down from 2.00 percent late on Thursday.
Yields rose slightly - but briefly - after the Fed's Yellen said late on Friday that it would not be "prudent" for the US central bank to postpone an interest rate hike until it reached its inflation target of 2 percent.
"That's the key, mildly hawkish statement in these comments," said Mulholland.
Bonds had gained earlier on Friday after data showed that US economic growth cooled in the fourth quarter as previously estimated, disappointing traders who had expected an upward revision.
Gross domestic product expanded at a 2.2 percent annual rate, unrevised from last month's forecast, the US Commerce Department said on Friday. The economy grew at a 5 percent rate in the third quarter.
Robust consumer spending, however, limited the slowdown in the pace of activity.
"It was disappointing because the headline was expected to be revised up and it wasn't. The most important component, personal consumption, was revised higher, however, and that was expected," said Lou Brien, a market strategist at DRW Trading in Chicago.
The next major data release for the market will be next week's employment report for March. Job gains for the past few months have been strong but some economists say that job growth is outpacing other economic measures, which may mean they have to slow if economic activity does not accelerate.
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