By Aaron Kuriloff 

U.S. government bond prices retreated Friday after fresh signals from Federal Reserve officials that interest rates could increase this year.

The yield on the benchmark 10-year Treasury note climbed to 1.573% Friday, according to Tradeweb, up from 1.536% the previous day. The two-year yield, which is highly sensitive to Fed policy, rose to 0.742% Friday, from 0.710% Thursday. Yields rise as bond prices fall.

While minutes from the Fed's July meeting signaled this week that policy makers were split on the timing of a short-term interest rate increase and waiting for a stronger consensus on growth and inflation, comments by some officials suggested the central bank could consider boosting rates as soon as September.

Federal Reserve Bank of New York President William Dudley on Thursday expressed confidence in U.S. economic growth and labor market strength in the second half of the year, which could push the officials to move.

"We definitely think second-half growth, and third-quarter growth in specific, is going to be quite a bit stronger than what we saw in the first half," he said.

Federal Reserve Bank of San Francisco President John Williams, who isn't a voting member of the rate-setting committee, said Thursday officials should move to raise rates "sooner rather than later," joining those concerned about overshooting inflation targets.

"If -- and it's a big if -- economic conditions persist roughly as they've been, and -- and it's a big and -- markets cooperate reasonably well, we're looking at one rate hike this year," said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia.

Federal-funds futures, which are used by traders to place bets on central bank policy, Friday showed an 18% chance of a rate increase in September, up from 15% the previous day, according to CME Group. The odds of an increase by December rose to just over 50%, compared with a 46.9% chance Thursday.

Investors and traders say they will look for fresh signals about the courses of central bank policy from Fed Chairwoman Janet Yellen, who is scheduled to speak in Jackson Hole, Wyo., next Friday.

Write to Aaron Kuriloff at aaron.kuriloff@wsj.com

(END) Dow Jones Newswires

August 19, 2016 11:31 ET (15:31 GMT)