U.S. producer prices rose slightly in June as a rising cost of services was offset by cheaper energy costs, beating economists' expectations that prices would be unchanged.
The Labor Department report comes on the heels of strong consumer price data published on Thursday, suggesting overall inflation could continue to rise moderately despite the gains in consumer prices.
In Treasuries, benchmark 10-year notes last rose 3/32 in price to yield 2.1097%, from 2.12% late on Thursday.
In currencies, continued bets on a U.S. rate cut sent the dollar lower for the third day in a row. The dollar index, which tracks the greenback against six major peers, fell 0.26%, with the euro up 0.19% to $1.1273.
The Japanese yen strengthened 0.63% versus the greenback at 107.83 per dollar.
In commodities, oil prices inched up on Friday as U.S. Gulf of Mexico crude output was halved by disruptions caused by a tropical storm, but concerns over a global crude surplus in the months ahead limited gains.
U.S. crude futures settled up 1 cent at $60.21 per barrel while Brent crude ended up 20 cents at $66.72.
Gold prices nudged higher as investors shrugged off concerns that the stronger-than-expected U.S. consumer inflation could influence the Fed's decision on aggressive monetary policy easing. Spot gold added 0.9% to $1,416.40 an ounce.
Source: Saudi Press Agency