By Amanda Cooper
NEW YORK (Reuters) - Treasury prices moved lower on Thursday after a surprise rise in the Federal Reserve's favored gauge of inflation but yields remained range-bound as investor jitters over global tensions continued to support prices.
The Fed has often cited benign inflation as one of the reasons to keep official interest rates low.
But the Commerce Department's final figures for fourth-quarter GDP showed the core personal consumption deflator was revised up to show a 1.2 percent rise from 0.7 percent, suggesting that inflationary pressures could be building, a possibility which led bond prices lower.
Yields are still close to their lowest levels in eight months, however, as investors continue to bet that neither inflation nor the jobs picture will pick up enough to warrant a rise in official rates this year.
"Taking a step back and looking at the greater scheme of things, it's about a two and a half basis point sell-off in the ten year (Treasury). We just seem to be in a very tight range," said Jon Blumenfeld, interest-rate strategist at BNP Paribas.
"There is nothing to make the market rally further in the short term without some new negative data on the economy. We already know that the Fed is not hiking, that's fully priced now," he said, adding that a build-up in short positions was also helping to keep 10-year yields within a 3.67-3.77 percent band.
The Commerce Department also reported U.S. economic growth holding at 4.1 percent as expected.
At 11:10 a.m. (1610 GMT) the benchmark 10-year Treasury note (US10YT=RR: Quote, Profile, Research) had shed 9/32 in price to yield 3.74 percent, versus 3.71 percent late on Wednesday.
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