NEW YORK: US Treasury yields fell on Friday, with benchmark and long-dated US yields hitting their lowest in over three weeks, as data showing the US economy contracted in the first quarter supported views of a later Federal Reserve interest-rate hike.
The government slashed its gross domestic product estimate to show GDP shrinking at a 0.7 percent annual rate, instead of the 0.2 percent growth it estimated last month. Still, the reading was a touch better than economists' expectations for a drop of 0.8 percent.
The data supported an expectation that the Fed would have to consider signs of weakness in the US economy before hiking interest rates for the first time in nearly a decade.
Fed rate hikes are expected to hurt bond prices, which move inversely to yields.
"The market simply doesn't believe the data will be strong enough to let the Fed (boost rates) this year," said Aaron Kohli, interest rate strategist at BNP Paribas in New York.
US 30-year Treasury yields were the biggest mover and hit their lowest in three and a half weeks, at 2.84 percent.
Along with the GDP data, long-dated bonds benefited from institutional investors' purchases for the purpose of month-end portfolio readjustments.
"The long end has been supported throughout the week through month-end buying," said Sharon Stark, chief fixed income strategist at D.A. Davidson in St Petersburg, Florida.
She said relief from a recent surge in corporate supply has helped long-dated bond prices.
US 30-year Treasury yields were set for their biggest weekly decline since mid-March. Benchmark 10-year yields also hit their lowest level in three and a half weeks, at 2.097 percent.
US two-year notes, which are sensitive to expectations regarding the timing of Fed rate hikes, hit their lowest level in a week at 0.6090 percent.
US five-year yields also hit their lowest in over a week at 1.48 percent, while seven-year yields hit their lowest in three weeks at 1.85 percent.
In addition to the GDP data showing a contraction, the Institute for Supply Management-Chicago Business Barometer unexpectedly fell in May, reversing the previous month's rise.
US 30-year Treasuries were last up 13/32 in price to yield 2.86 percent, from a yield of 2.89 percent late Thursday.
US 10-year notes rose 4/32 in price to yield 2.11 percent, from a yield of 2.13 percent late Thursday.
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