By Joseph Adinolfi, MarketWatch

Uncertainty surrounding fiscal, monetary policy outlooks entices investors back into U.S. debt

Treasury yields touched their lowest levels in more than five weeks on Friday, cementing their largest weekly decline since December, as President Donald Trump offered no new details about his plans for implementing his sweeping economic policy promises.

The yield on the 10-year Treasury note dropped 7.1 basis points on Friday, and 10.8 basis points this week, to finish at 2.317%, its lowest day-end level since Nov. 29. The yield on the two-year note slid 4.8 basis points on Friday, and 5.3 basis points on the week, to finish at 1.145%, its lowest day-end level since Dec. 12. The yield on the 30-year bond shed seven basis points on Friday, and 7.7 basis points this week, to end at 2.953%, its lowest day-end level since Jan. 17. Bond yields move inversely to prices.

Speaking at the Conservative Political Action Committee hearing on Friday, Trump reiterated that he plans to invest heavily in American infrastructure while slashing taxes for businesses and middle-class families.

His remarks echoed assurances from Treasury Secretary Steven Mnuchin, who, in a series of interviews earlier in the week said the administration plans to enact its tax-reform plans before Congress's August recess.

The lack of details surrounding Trump's plans has helped support the battered bond market as investors bet that the economic impact of any new measures would be limited in 2017.

Treasurys sold off sharply following Trump's Nov. 8 electoral victory, in part due to the expectation that his administration would move swiftly to pass sweeping economic reform measures, including corporate tax cuts, increased infrastructure spending and deregulation.

Now, investors have begun to second-guess those moves because the new administration appears to be moving much more slowly than previously believed, said Kevin Nicholson, chief market strategist at RiverFront Investment Group.

"The [bond] market is basically discounting the optimism from the Trump rally," Nicholson said.

Yields have been dropping for three straight days, beginning after the release of minutes from the Federal Reserve's latest policy meeting. In the minutes, Fed officials sounded somewhat more reluctant to raise interest rates than in recent remarks from Fed Chairwoman Janet Yellen and a bevy of other Fed officials.

Also, lingering tensions between Mexico and the U.S. have helped entice investors back into safety plays like Treasurys, said Karissa McDonough, fixed-income strategist at People's Bank.

Secretary of State Rex Tillerson and Department of Homeland Security Secretary John Kelly visited Mexico earlier in the week and emphasized their desire to maintain cordial relations between the two neighboring countries.

"There really is demand for stability and safety when it's not super clear if there's going to be a border-adjusted tax or how relations will be carried out with other sovereign nations," McDonough said.

Later Friday morning, investors will digest the University of Michigan's consumer-sentiment survey, as well as comments from Trump, who is slated to speak at the Conservative Political Action Conference.

A batch of economic data released on Friday was relatively sanguine, Nicholson said. Consumer sentiment was strong in February, though it moved off a 13-year high reached in January. (http://www.marketwatch.com/story/consumer-sentiment-still-strong-in-february-but-comes-off-13-year-high-2017-02-24)Meanwhile, new-home sales' jumped 3.7% to 555,000 in January.

(END) Dow Jones Newswires

February 24, 2017 16:20 ET (21:20 GMT)