Treasurys extended earlier gains on Wednesday after the Federal Reserve released the minutes from its latest policy meeting.
Benchmark 10-year notes were last up 15/32 in price to yield 2.087, a session low, compared to 2.122 percent prior to release of the minutes.
Federal Reserve officials are debating changes to how they may deploy their policy tools when they begin lifting U.S. short-term interest-rates from their current near-zero level, minutes from their January meeting show.
The Fed decided last year to use the so-called overnight reverse repurchase facility, known as RRP, to supplement two other more familiar policy rates when the time comes to lift borrowing costs, and in the most recent meeting debated raising the cap temporarily on the facility.
U.S. Treasury yields retreated from recent highs earlier on Wednesday as softer-than-forecast U.S. economic data.
Other maturities also posted price gains, which widened after the government reported that U.S. producer prices in January had their biggest monthly drop in more than five years.
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Housing starts fell last month as manufacturing output inched up, according to other newly published data.
"From the Fed perspective, when you get inflation numbers like this, it's harder to move the needle on getting closer to raising rates," said Thomas Simons, money market economist at Jefferies LLC in New York. "It talks against the June hike."
Treasurys
Economists mostly expect the Fed to start raising rates in June, citing rapidly tightening labor market conditions. The Fed has kept its short-term rate near zero since December 2008.
According to CME FedWatch, which tracks Fed funds futures contracts, bets on a June rate hike eased to slightly over 70 percent probability on Wednesday from just over 72 percent on Tuesday.
Trading was little affected by the Greek debt crisis but prices were benefiting from buyers looking for bargains after a sharp selloff in Treasurys, according to Simons.
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Treasury prices have been dropping, with yields on 30-year bonds and benchmark 10-year notes climbing on Tuesday to seven-week peaks. Yields on U.S. 7- and 5-year notes also touched their highest levels since early January.
Through Tuesday, the Merrill Treasury index was down 2.55 percent to date in February, putting it on pace for the worst month for Treasury debt since January 2009, when it slid 3.09 percent on a total return basis.
The index has not quite fully retraced all of January's gains, which were the best in six years, but the year-to-date gain for Treasurys is now just 0.26 percent.
Gains on Wednesday were strongest in 30-year bonds, which fell more than two points on Tuesday and on Wednesday were last yielding 2.7079 percent on a price gain of 19/32, according to Thomson Reuters data.