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Treasury yields rise on surprising Chicago PMI

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U.S. benchmark Treasury yields moved higher on Friday, following a better-than-expected reading on Chicago business activity.

The pace of business activity in the U.S. Midwest rose more than expected in May, rising to its best level since October 2013, a report showed on Friday.

Read More Chicago PMI hits 65.5 in May vs. 61 estimate

Still, bond price gains—which move inversely to yields—were curbed by the impression that a rebound in the second quarter still seemed likely. On Friday, new data tempered some of that optimism, as figures showed U.S. consumer spending fell in April, as prices began to rise. Traders were awaiting readings on manufacturing and consumer confidence in order to confirm the near-term trend.

10-year Treasury notes yielded 2.46 percent early on Friday, up slightly from Thursday's close of 2.447 percent.

Read MoreCNBC explains: Bonds and rates

Reuters cited traders as saying foreign investors have scrambled for U.S. bonds because of relatively higher yields compared with German Bunds as they anticipate that the European Central Bank might cut interest rates next week to help the euro zone economy.

Read MoreCNBC explains: Treasury bond prices and yields

Policymakers, economists and historians will gather at the Stanford monetary policy conference on Friday to discuss central bank policy. Speakers include Federal Reserve Presidents John Williams, Charles Plosser, Jeffrey Lacker and Esther George.

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