U.S. benchmark Treasury yields inched up from 11-month lows on Thursday as data showed the U.S. economy shrank for the first time in three years in the first quarter but did not alter the view of a solid rebound this spring.
The bond market also digested $29 billion of seven-year Treasurys supply, which drew average demand from investors. The last leg of this week's $95 billion in fixed-rate supply was sold at a 2.010 percent yield, the lowest since October.
The downgrade in business activity that resulted in first-quarter gross domestic product falling 1.0 percent stemmed largely from a drop in inventories. While this was steeper than forecast, it was not severe enough to change the outlook for a sizable recovery in the second quarter.
Moreover, a recent bond market rally has lowered yields to levels consistent with this level of growth, analysts said.
"The bond market is priced in for a pretty weak economy already. Everybody knew it was going to be a contraction even though it's a bigger drop than what they had thought. There's not more room for yields to move lower," said Craig Dismuke, chief economic strategist at Vining Sparks in Memphis, Tennessee.