By Sam Goldfarb 

U.S. government-bond prices fell Thursday as traders responded to better-than-expected data on regional manufacturing activity and a report that U.S. officials are debating whether to scale back tariffs on Chinese imports.

The yield on the benchmark 10-year U.S. Treasury note settled at 2.747%, compared with 2.729% Wednesday.

Yields, which rise when bond prices fall, initially edged higher after the Federal Reserve Bank of Philadelphia's manufacturing index rose to 17.0 in January -- above the 8.0 reading anticipated by economists surveyed by The Wall Street Journal. They got a further boost from a Journal report that U.S. Treasury Secretary Steven Mnuchin had recently proposed lifting some or all tariffs on Chinese goods as a way to advance trade talks with China.

Both developments at least momentarily helped ease concerns about a recent slowdown in U.S. manufacturing growth, which analysts have largely blamed on the U.S.-China trade dispute. Investors tend to sell Treasurys when they are feeling more optimistic about the U.S. economy, as faster growth increases the relative appeal of riskier assets and can also generate inflation, which chips away at the purchasing power of the debt's fixed returns.

Some analysts believe Treasury yields have room to rise in the coming months, given the current gap in expectations for short-term interest rates between Federal Reserve officials and investors. While the Fed has signaled the potential for two rate increases this year, investors have been skeptical, with some going so far as to anticipate a rate cut from the central bank.

Investors in Treasurys are probably "too pessimistic at this point" about the economy, said Zhiwei Ren, portfolio manager at Penn Mutual Asset Management Inc.

Growing evidence that the Fed isn't going to cut rates in the near future could push short-term yields higher, Mr. Ren said. At the same time, yields on longer-term Treasurys will likely be contained "by slower global growth and lower inflation," he added.

Write to Sam Goldfarb at sam.goldfarb@wsj.com

(END) Dow Jones Newswires

January 17, 2019 15:53 ET (20:53 GMT)