U.S. government bond prices fell Friday after the Commerce Department said the economy grew at a better-than-expected 2.1% in the second quarter.
The yield on the benchmark 10-year Treasury note settled at 2.081%, the highest in almost two weeks, from 2.078% Thursday. Yields decline when bond prices rise.
Analysts said the data on U.S. gross domestic product—the last key figures expected ahead of next week’s Federal Reserve meeting—did little to shift expectations the central bank will cut interest rates by 0.25 percentage point this month.
Federal-funds futures, used by investors to place bets on central-bank policy, early Friday showed an 81% chance of a 0.25 percentage-point cut in July, up from about 76% last week, according to CME Group data. Bets the Fed will cut rates by 0.5 percentage point dwindled to 19% from 24%.
Many remain divided about how much more the Fed will want to cut interest rates this year. While Fed officials have also said they are concerned about the potential for tensions regarding trade to drag on the U.S. expansion, the economy appears to be growing at a steady pace.
“There’s a willingness to cut rates when growth is fine as long as inflation is under pressure,” said Ian Lyngen, head of U.S. government bond strategy at BMO Capital Markets. “This GDP report supports a slow fine-tuning of the rate cuts rather than a more dramatic move.”
The U.S. dollar advanced, accelerating after White House National Economic Council director Lawrence Kudlow said the U.S. had ruled out intervening in currency markets to lower its value. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, rose 0.2% to a recent 90.80.
President Donald Trump has criticized foreign central banks for implementing easy-money policies that have weakened their currencies against the dollar. Mr. Trump has said a weaker dollar would bolster the competitive position of U.S. companies.
Write to Daniel Kruger at Daniel.Kruger@wsj.com
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