Long-dated Treasury yields pared losses on Friday after Federal Reserve Vice Chairman Stanley Fischer said it is still too early to tell if the recent volatility in equities has made a September rate hike more or less compelling, indicating that the lift could still happen next month.
Short-term yields turned positive on the news, with the yield up 3 basis points to 0.724 percent. Earlier, it rose to its highest in more than a week at 0.735 percent—near its highest level of the year.
Yields were volatile earlier on Friday, with benchmark 10-year Treasury yields bouncing to 2.185 percent, near their session high, after falling as low as 2.13 percent. The 10-year note yield fell to its lowest since April earlier this week as fears of a global growth slowdown gripped the market and spurred widespread risk aversion.
"There could be a tendency for bonds to sell off a bit, said Dan Heckman, senior fixed-income strategist at U.S. Bank Wealth Management. "We're in that volatile stage where the market is going to be pretty nervous going into the August jobs report next Friday, because I think that's going to be the key decider of whether the Fed ultimately decides to move off of zero or not."
The wild price swings in stocks and bonds could intensify as we draw closer to the Fed's meeting on Sept. 16-17, said Heckman, who added that news out of global markets could dictate the direction of Treasurys in the upcoming week.
On the long end of the yield curve, 30-year Treasury bonds pared earlier gains, bringing the yield to 2.91 percent and off a session low of 2.87 percent.
Traders said they expect the global market to remain volatile going into September as uncertainty surrounding China and the Federal Reserve continues to weigh on investor sentiment and market returns.
Major U.S. stock indexes were mostly flat on the day, but the Dow and S&P 500 gained about 1 percent for the week, while the Nasdaq rose nearly 3 percent week-to-date. WTI crude closed up 6.3 percent at $45.22 a barrel, while Brent rose about 5 percent after surging 10 percent on Thursday.
The China Shenzhen index closed up more than 5 percent, but fell some 9 percent for the week. The Stoxx 600 in Europe rose 0.3 percent and was up 0.6 percent for the week.
On the data front, U.S. personal income for July rose 0.4 percent and spending increased by 0.3 percent, which puts the economy on track to expand 1.2 percent in the third quarter, down from 1.4 percent on Wednesday, according to the Atlanta Fed's GDPNow model.
The revised Michigan consumer sentiment index came in below expectations at 91.9. Analysts polled by Thomson Reuters expected the index to give a final reading of 93 for August. July's reading came in at 93.1.
Investors will eye the Jackson Hole meeting, which brings together academics, financial market participants and many of the world's leading central bankers, for any significant soundbites and hints as to near-term monetary policy.
On Wednesday, New York Fed President William Dudley said the case for a U.S. interest rate hike in September had become less compelling. However, he did not say September was off the table, instead adding that the Fed would review data and market conditions.
"There is no question that they're [the Fed] keeping a very close eye on global markets and currencies. … But when you look at the domestic economy, you can see that there is no valid reason for them to stay at zero," Heckman said, citing the tightening labor market and falling unemployment rates.
"We think further waiting would cause some confusion and further uncertainty in the market and create even more volatility both for stocks and bonds."
Lifting rates this year would show that the Fed has confidence in the economy and send a positive message to market participants, savers and retirees, according to Heckman.
However, some economist have cited below-target inflation—which could move lower thanks to the recent drop in energy prices, the stronger dollar and global market uncertainty—as good a reason to hold off on raising rates.
Looking ahead, the Street will pay close attention to the European Central Bank's meeting next Thursday and the August payrolls report on Friday.
—CNBC's Jenny Cosgrave contributed to this report.