US Treasury prices closed higher on Friday as investors bought back previously sold bonds in preparation for the end of the month.
Strong regional business data early in the session prompted a short-lived sell-off that reversed itself as the last trading day of the month wore on.
The dollar's easing against other major currencies gave US government bonds some impetus as it heightened the potential for more buying by foreign central banks.
"The dollar is one of those things where 'up is down and down is up.' A soft dollar means intervention, and intervention means foreigners buying Treasuries, so at the margin, it helps, in the short term," said Bill Hornbarger, chief fixed-income strategist at AG Edwards & Sons in St. Louis.
In addition, the month-end can often imply volatile trading conditions.
Dealers felt more comfortable buying back Treasuries sold during a price fall in early February in spite of a jump in Midwest employment that signaled next week's jobs report could be stronger than previously expected.
"It's the month-end more than anything else. You have had Fed officials pretty consistently this week saying inflation is not a problem, and if you look overseas, most bond markets were really strong," he said.
The benchmark 10-year Treasury note got a push in part from a robust performance in the German Bond market, where speculation swirled over a possible rate cut by the European Central Bank when it meets next week.
At 5:00 pm, 10-year prices were up 18/32 in price to yield 3.97 percent, the lowest in a month and down from 4.04 percent on Thursday.
The market showed only a muted negative reaction to the Chicago Purchasing Managers reading of business activity, which inched down to 63.6 in February after hitting a decade-high of 65.9 in January.
The headline figure was in line with forecasts and should not alter estimates for a modest pullback in the Institute for Supply Management's survey of US manufacturing next week.
Given the market's focus on job creation, Treasuries did suffer a mild set-back as investors digested the climb in the Chicago PMI's employment index to 54.8 from 48.3 in January, its best reading since April 1998.
This could encourage analysts to nudge up their forecasts for February US payrolls figures next week.
"The one noteworthy development was a substantial rise in the employment gauge," said Stephen Stanley, chief economist at RBS Greenwich Capital Markets.
"Still, the ISM employment index has been positive for three months running through January, and we're still waiting for factory payrolls to level off," he added.
Earlier, the market barely blinked at a surprise upward revision in fourth-quarter US gross domestic product growth to 4.1 percent from 4.0 percent. Upward revisions to inventories and business investment helped overcome a drag from net exports.
Inflation was quiescent, with the core deflator for personal consumption expenditures staying at just 0.7 percent. Most analysts see GDP growth accelerating further above 4.0 percent this quarter as well.
But they equally expect inflation to stay near historic lows, allowing the Federal Reserve to be patient on raising interest rates. Two-year Treasury note yields were at 1.65 percent, against 1.68 percent, while five-year notes rose 7/32 to yield 2.94 percent against 2.98 percent.
The 30-year bond rose over a point in price to yield 4.84 percent, versus 4.91 percent.
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