Treasurys rose on Thursday after the government's auction of seven-year Treasury notes, the final sale of $96 billion in new coupon-bearing supply this week.
The Treasury Department auctioned $29 billion in seven-year notes at a high yield of 2.258 percent. The bid-to-cover ratio, an indicator of demand, was 2.59.
Traders expected the new notes to price at yields of 2.28 percent, according to trading in the "when issued'' market.
Direct bidders, which includes some central banks and large asset managers, bought 33 percent of the notes, higher than their average 19 percent.
"The recent auctions have shown a particularly strong investment fund demand both in January and February ... I think what we saw is continuing investment fund demand in the belly of the curve," said John Canavan, fixed income analyst at Stone McCarthy Research Associated in Princeton, New Jersey.
Investors may have been lured to the debt by the recent rise in yields, after Federal Reserve Chair Janet Yellen said the central bank could raise interest rates six months after its current bond-buying program ends, suggesting a potential rate hike as early as spring 2015.
"Although there has been some correction the last two days we are still looking at more attractive yields than we had been seeing and there is some sentiment that the initial response to the FOMC meeting has run its course," Canavan said.
Seven-year notes were last flat in price to yield 2.24 percent. The notes yields have fallen from a three-month high of 2.34 percent on Monday, but remain higher than the 2.14 percent area they traded at before Yellen's comments.
The spread between yields of five-year notes and thirty-year bonds narrowed to 179 basis points on Thursday, its tightest in five years.
Intermediate-dated Treasurys yields had jumped after Federal Reserve Chair Janet Yellen said the central bank could raise interest rates six months after its current bond-buying program ends, suggesting a potential rate hike as early as spring 2015, sooner than many expect.
"We backed up a little bit after the Fed meeting ... there haven't been any recent issues with supply,'' said Lou Brien, a market strategist at DRW Trading in Chicago.
Benchmark 10-year notes rose 7/32 in price to yield 2.67 percent, after edging as high as 2.72 percent immediately after the data. Meanwhile, 30-year notes rose 22/32 in price to yield 3.50 percent, after dropping below 3.50 percent earlier for the first time since July.
The spread between yields of five-year notes and thirty-year bonds narrowed to 180 basis points on Thursday, its tightest in five years. Intermediate-dated debt has underperformed longer-dated bonds since Yellen's comments, as investors adapt to the possibility of rate hikes sooner than expected.
Treasurys have been supported by safe-haven buying spurred by ongoing tensions over Ukraine, and as U.S. stocks have struggled to break above recent highs to new records.
Economic data on Thursday showed sturdy growth. The number of Americans filing new claims for unemployment benefits fell unexpectedly last week to its lowest in nearly four months, suggesting a strengthening labor market.
U.S. economic growth was 2.6 percent in the fourth quarter, up from the 2.4 percent the Commerce Department estimated last month, reflecting a stronger pace of consumer spending than previously estimated.