NEW YORK -- Treasury prices ended another strong week on a positive note Friday, with a disappointing second-quarter U.S. growth reading triggering the latest gains.

Investors scaling back their expectations for an August rate hike by the Federal Reserve sent the 10-year Treasury note yield below 5 percent for the first time in six weeks. At 5 p.m. EDT, the yield was at 4.99 percent, down from 5.04 percent late Thursday. The 10-year note's price, which moves in the opposite direction, was up 11/32.

The 30-year bond was up 16/32. Its yield declined to 5.07 percent from 5.11 percent.

The 2-year note was higher by 4/32, yielding 4.98 percent, down from 5.05 percent.

Yields on 3-month Treasury bills were 5.06 percent as the discount fell to 4.94 percent from 4.97 percent.

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The price gains took place mainly in the morning, with Treasurys struggling to eke out fresh gains later in the session, as investors moved to the sidelines ahead of the weekend. Traders said technical factors also stemmed the price gains, with the 10-year yield hitting a key resistance point at its session low of 4.98 percent.

Early Friday, the Commerce Department reported that during the second quarter, the U.S. economy expanded by a 2.5 percent annualized rate compared with economists' expectations of a 3.2 percent gain. The reported rate was less than half the 5.6 percent annualized gain during the first quarter.

To make matters worse, government revisions to past economic data showed the economy grew more slowly during the 2003-2005 period than had previously been reported.

After the release of the gross domestic product data, investors raised their expectations that the Fed will pause at next month's meeting. A hike would take the Fed's target funds rate to 5.50 percent from 5.25 percent. Late Friday, the August fed funds futures contract was pricing in odds of 31 percent for a rate hike next month, down from 40 percent Thursday.

Alan Ruskin, chief international strategist at RBS Greenwich in Greenwich, Conn., said "the recent shift in expectations makes the Fed's job easier ... The lower the expectations go, the easier it is for the Fed to avoid looking overly dovish if they do not tighten."

For some time, forecasters and Federal Reserve officials have looked for a slower economy, but the expectation had been that strong growth would moderate toward its longer-term trend performance of around 3 percent.

However, the Commerce Department's report also flashed some inflation warnings for investors.

The government's personal consumption expenditures price index jumped during the second quarter to 4.1 percent, following the first quarter advance of 2 percent. More unwelcome inflation news arrived Friday morning with the release of the second-quarter employment cost index. It rose by 0.9 percent, over the expected gain of 0.8 percent and above the 0.6 percent rise in the first quarter. The second quarter gain matched the fastest quarterly gain since June 2004.

So while slow growth is a plus for Treasurys and lowers odds the Fed will have to lift rates, the data detailing the inflationary environment suggest an opposite reaction from the Fed. All in all, that means the Fed will continue to face a difficult decision when it meets next month.

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