There remained no progress in Greece's negotiations with its lenders on a deal to avert default, a move that traders fear might hasten the cash-strapped nation's exit from the euro zone and cause problems for global financial markets.
With Athens owing the International Monetary Fund a 1.6 billion euro payment at month's end, senior euro zone officials have formally discussed a Greek default for the first time, several of them told Reuters. "Greece is the main thing.
Read MoreHow the Fed screwed up the bond market
That's sending people for cover," said Justin Hoogendoorn, fixed income strategist at BMO Capital Markets in Chicago. Worries about Greece caused selling in European and U.S. stocks and stoked appetite for low-risk Treasurys and German Bunds, analysts said.
In afternoon U.S. trading, the yield on benchmark 10-year Treasury notes was flat at 2.38 percent. It had reached 2.500 percent on Thursday, which was the highest since Oct. 1, according to Reuters data.
The 30-year bond yield was also flat at 3.10 percent after reaching a seven-month high of 3.227 percent. The bond market's rebound from its losses earlier this week will likely be limited by expectations of more corporate bonds hitting the market. Companies have sold over $36 billion in investment-grade bonds this week, according to IFR, a unit of Thomson Reuters.
Another week of volatile trading in Treasurys raised some doubts about whether the Fed will telegraph intentions to raise interest rates later this year.
While recent data suggest the U.S. economy has woken from its winter doldrums, rising U.S. yields have lifted rates on mortgages and other longer-term consumer loans, which may cause Fed officials to reconsider ending their near zero-rate policy.
"There is a showdown on what the market thinks and what the Fed wants to do," said Kevin Giddis, fixed income head at Raymond James in Memphis, Tennessee. The Federal Open Market Committee, the U.S. central bank's policy-setting group, will meet on Tuesday and Wednesday.