Fed-driven bond rally stalls with yields lowest since May

Treasuries fell Friday but remained on course for a third straight weekly gain, with benchmark yields near the lowest levels since early May.

Traders squared their positions to start the session, pushing yields up and snapping a five-day rally. Inflation gauges in US economic data were firmer than expected, leading traders to pare bets on interest-rate cuts from the Federal Reserve this year to 62 basis points from as high as 65 basis points on Thursday.

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The yield on the 10-year note was higher by about 3 basis points by mid-morning in New York. 

Still, the Bloomberg US Treasury index was up on the week and set to close out its best month since February. The advances have been driven by economic data that reinforced wagers on…