U.S. government debt prices were significantly higher on Friday as investors responded to Janet Yellen's two-day address to Congress, and the release of soft Consumer Price Index data and retail sales reports.
The yield on the benchmark 10-year Treasury note, which moves inversely to price, fell sharply to around 2.321 percent, while the yield on the 30-year Treasury bond was also lower at 2.911 percent.
Earlier today, the 10-year Treasury note hit a low of 2.279 percent, its lowest level since June 30.
10-year intraday chart
The Federal Reserve is expected to raise rates by December, but with weaker retail sales and stagnant CPI, investors are beginning to doubt those expectations.
"This is a game change for market expectations. Now it's when does the fed respond and what does transitory really mean," said Ian Lyngen, BMO head US rate strategist. "It just means easier monetary policy and lower rates for longer – that's the narrative that the equity market is following at the moment."
On the data front, U.S. retail sales dropped 0.2 percent in June versus the expected 0.1 percent increase on Friday. U.S. Consumer Price Index remained unchanged in June versus the 0.2 percent increase expected. U.S. consumer sentiment fell to 93.1 in a preliminary survey, missing expectations of 95 percent, according to the University of Michigan.
"Getting another rate hike off in 2017 is more of an open question," wrote JPMorgan chief U.S. economist Michael Feroli. "[It] will importantly hinge on the second half CPI reports."
Meanwhile, U.S. senior Democrat Nancy Pelosi called on Thursday for an independent body to investigate what she described as "cold, hard evidence" that the Trump family played a role alongside Russia in influencing last year's presidential election.
In oil markets, Brent crude traded at around $48.97 a barrel on Friday morning, up 1.14 percent, while U.S. crude was around $46.58 a barrel, up 1.09 percent.
— CNBC's Gina Francolla and Patti Domm contributed to this report.