Bonds

10-year yield cuts gain after data shows subdued inflation

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The 10-year U.S. Treasury yield came off its high on Friday as the latest inflation data showed tamed price pressures.

The yield on the benchmark 10-year Treasury note last traded up 3 basis points to 1.65%. The rate jumped 6 basis points earlier. The yield on the 30-year Treasury bond rose to 2.394%. Yields move inversely to prices.

Treasurys

On the inflation front, the core personal consumption expenditure price index, which strips out volatile food and energy prices, rose 0.1% month over month, matching expectations from economists polled by Dow Jones. Year over year, the gauge climbed 1.4%, slightly lower than a 1.5% estimate.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, dropped 1.0% last month after rebounding 3.4% in January, the Commerce Department said on Friday.

Personal income tumbled 7.1% after surging 10.1% in January. Economists polled by Reuters had forecast consumer spending decreasing 0.7% in February and income declining 7.3%.

On Thursday, Federal Reserve Chairman Jerome Powell hinted that the central bank would eventually roll back its support for the economy.

"As we make substantial further progress toward our goals, we'll gradually roll back the amount of Treasurys and mortgage-backed securities we've bought," Powell told NPR's "Morning Edition."

Last week, Powell suggested that the central bank would let inflation run hotter if it helped achieve full and inclusive employment. Recent concerns about inflation have driven bond yields higher, seeing the 10-year Treasury yield top 1.7% last week.

Data released by the Labor Department on Thursday showed that the number of jobless claims filed last week also fell below 700,000 for the time since the coronavirus pandemic began just over a year ago.

Discussing whether Treasury yields could move higher still, Christian Keller, head of economics research at Barclays, told CNBC's "Squawk Box Europe" on Friday that bond yields "have moved a lot already."

"A lot of this has actually been through the real yields so there is an expectation for better growth in the future so that in principle we think is a good thing," he said.

Keller explained that he expected to see "a lot" of inflation in the next few months but this would "mostly be a transitory phenomenon."

CNBC's Maggie Fitzgerald contributed to this report.