Treasury Yields Edge Lower

By Akane Otani Features Dow Jones Newswires

U.S. government-bond prices rose Friday after data showed U.S. economic growth picked up in the second quarter, but that inflation remained tepid.

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The yield on the benchmark 10-year U.S. Treasury note settled at 2.291%, compared with 2.312% on Thursday and 2.232% a week earlier. Yields rise as bond prices fall.

It was the first weekly gain for bond yields since July 7.

Bonds bounced back from early losses Friday after the Commerce Department said gross domestic product rose at a 2.6% annual rate in the second quarter of the year, just below the 2.7% that economists surveyed by The Wall Street Journal had expected.

The reading was a rebound from the first quarter, when GDP grew at a disappointing 1.2% rate.

Still, data continues to suggest flagging inflation growth.

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The employment-cost index for civilian workers, a broad gauge of U.S. wages and benefits, advanced by a seasonally adjusted 0.5% in the second quarter, the Labor Department said Friday, less than the 0.6% rate economists expected and a slowdown from the first quarter.

Investors consider inflation one of the greatest threats to long-term bonds, because it erodes the purchasing power of their fixed payments.

"The big question we keep returning to is why we aren't seeing wage growth when unemployment is down," said Scott Colyer, chief investment officer at Advisors Asset Management.

Central banks have suggested in recent weeks that they would be cautious about tightening monetary policy if inflation data continues to come in soft. Federal Reserve officials said Wednesday that inflation measures were "running below" their 2% target instead of "somewhat below" target, a tweak in language that some analysts took to mean officials were signaling slightly more concern about the data.

Fed-funds futures show investors see a roughly 50% chance of the Fed raising rates by the end of the year, down from 54% a month ago, according to data from CME Group. Higher interest rates tend to weaken demand for outstanding government bonds.

Write to Akane Otani at akane.otani@wsj.com

(END) Dow Jones Newswires

July 28, 2017 16:11 ET (20:11 GMT)