By Gunjan Banerji

Government bonds strengthened Friday, easing selling that has dominated much of February.

The yield on the benchmark 10-year Treasury note slipped to 2.879%, according to Tradeweb, from 2.917% Thursday. Yields fall as bond prices rise.

Treasury yields have risen in recent weeks as solid economic and inflation data have led investors to sell government bonds. Inflation is a primary threat to Treasurys because it weakens the purchasing power of their fixed payments.

Higher domestic yields alongside improvement in some European bonds may have led investors to buy U.S. government debt, analysts said. The 10-year yield hit its highest level in four years Wednesday. Many investors have said that higher yields would make the securities more attractive, which may have prompted recent buying.

"You're seeing some investment coming in," said John Briggs, head of strategy at NatWest Markets.

Investors will also be watching for more clues on future interest-rate policy moves when several Federal Reserve officials speak Friday ahead of Chairman Jerome Powell's congressional testimony next week.

Recent interest rate volatility has spurred turbulence across asset classes, analysts say. The Federal Reserve released minutes from a January meeting this week, triggering gyrations in both stocks and bonds.

Federal Reserve officials signaled growing confidence in the U.S. economy when they met in January, minutes from the meeting showed Wednesday. They supported the Fed's current rate path, and could be a precursor to a more aggressive plan.

Investors have also built up a large amount of bearish bets on Treasury futures, according to Bank of America Merrill Lynch. Investors can tap Treasury futures to make directional bets or hedge other parts of their portfolio.

"Extreme positions can be vulnerable to a rapid unwind which in this case could aggravate a rate rally," wrote Bank of America Merrill Lynch analysts in a Feb. 23 note.

Write to Gunjan Banerji at Gunjan.Banerji@wsj.com

(END) Dow Jones Newswires

February 23, 2018 11:11 ET (16:11 GMT)

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