Most US Treasuries ticked lower on Thursday after data hinting that inflation may be on the rise put a small dent in the market's confidence the Federal Reserve will not raise interest rates any time soon.
However, some among a raft of Fed officials speaking during the day helped to blunt any sell-off by calling for the Fed to hang on for convincing evidence of stable inflation and a reinvigorated labour market before boosting rates from four-decade lows.
Early pressure on Treasuries prices came from a final Commerce Department report on fourth-quarter Gross Domestic Product that showed the core personal consumption deflator, the Fed's favoured inflation gauge, revised up to show a 1.2 percent rise, instead of 0.7 percent, suggesting inflation may be building.
The Fed has cited benign inflation, along with a weak jobs market, as reasons for being patient in raising interest rates, and Fed officials continued that message on Thursday.
The Fed has kept overnight borrowing costs at a 1958 low of 1 percent since June in an effort to boost the economy.
As of Thursday afternoon, benchmark 10-year Treasuries were trading 7/32 lower, with the yield rising to 3.74 percent from 3.69 percent on Wednesday.
Yields on two-year notes were slightly lower at 1.51 percent after new notes were issued at 1.52 on Wednesday.
Five-year notes lost 2/32 to yield 2.69 percent, while 30-year bonds shed 17/32, with the yield rising to 4.70 percent from 4.66 percent.
Among other Fed officials speaking on Thursday, St. Louis Fed chief William Poole said the US economy was well placed for a long and solid expansion. He said interest rates must rise and it was a question of timing, depending on the vigour of the economy.
In a speech to the New York Bankers Association, New York Fed President Timothy Geithner warned against the risks to the economy by the growing budget deficit and the low national savings rate.