US 10-year yield retreats further from 4-year high as investors digest Fed remarks

  • The Federal Reserve released its Monetary Policy Report to Congress, warning lawmakers that the economy may be beyond full employment and that interest rate increases are needed.

U.S. government debt yields fell Friday amid of a report on monetary policy and speeches from the Federal Reserve.

The yield on the benchmark 10-year Treasury note, which hit a four-year high of 2.95 percent earlier in the week, was lower at around 2.871 percent at 4:02 p.m. ET.The 30-year Treasury bond yield was lower at 3.158 percent. Bond yields move inversely to prices.

The two-year Treasury note yield, which hit a 2008 high earlier in the week, was also lower Friday. Some of the strength in bonds appeared to come from late-week purchasing.

"I think you're seeing buying because bonds were under pressure for most of the week ... maybe covering some short positions," said Kathy Jones, chief fixed income strategist for the Schwab Center for Financial Research. But "as long as the economic data keeps coming in a showing that the economy is growing above potential, we'll continue to see yields going higher."

While economic data wasn't likely to affect markets Friday, Jones said that investors will be bracing for another jobs report next week as well as a speech on monetary policy from new Fed Chair Jerome Powell.

"He's still a bit unknown. He's been put forward as the consensus-driven, no-change-from-Yellen-type Fed Chair but there's a new set of economic data all the time. We really don't know about his approach or philosophy toward monetary policy."

The Fed released its Monetary Policy Report to Congress on Friday, warning lawmakers that the economy may be beyond full employment and that further interest rate increases are needed. The central bank also said that the economy is growing at a steady pace while inflation pressures remain tame.

"The FOMC expects that, with further gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will remain strong," the report said, echoing language from prior Federal Open Market Committee meetings.

—CNBC's Jeff Cox contributed to this report.