US Treasury yields fell on Friday as data showing a sharper-than-forecast deceleration in economic growth in the fourth quarter spurred buying of US government debt ahead of the Federal Reserve's first policy meeting of 2017. Bond purchases were tempered by relatively solid readings on consumer spending and business investments, supporting the view the US economic expansion remained on track.
"The economy has less momentum that many perceived," said Robert Tipp, chief investment strategist at PGIM Fixed Income in Newark, New Jersey.
Gross domestic product grew at a 1.9 percent annualized pace in the final three months of 2016, compared with a 3.5 percent rate in the third quarter. Analysts polled by Reuters had forecast a 2.2 percent GDP growth pace.
Trade subtracted 1.70 percentage points from GDP growth in the last quarter after adding 0.85 percentage point in the third quarter.
"The headline figure was softer than expected, but it's mostly due to weaker trade. The underlying figures were better than expected," said Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research.
Data on durable goods orders and consumer sentiment helped dispel some disappointment from the latest GDP report.
Benchmark 10-year Treasury yields were down over 2 basis points at 2.482 percent, retreating further from a four-week high reached on Thursday. For the week, the 10-year yield was up 1.5 basis points.
The decline in yields was limited by uncertainty about the effect of US President Donald Trump's economic policies. Investors are assessing the impact on the federal deficit and inflation from his moves in the first week of his presidency aimed to spur domestic jobs and business investments and restrict trade and immigration.
"There are a lot of worries about fixed income. Are we going to see policies that will raise the deficit and inflation?" Schwab's Jones said.
Wall Street's advance to record highs with the Dow Jones Industrial Average breaking above 20,000 this week also tempered demand for lower-yielding Treasuries, analysts said.
As US stock prices jumped on proposed tax cuts, infrastructure spending and looser regulations from the Trump administration and a Republican-controlled Congress, Fed policymakers have expressed a wait-and-see attitude on a possible response until they see more details on these moves.
The Federal Open Market Committee, the Fed's policy-setting group, is widely expected to leave rates unchanged in a target range of 0.50-0.75 percent at its meeting next Tuesday and Wednesday after a quarter-point hike in December.