U.S. Treasury yields rose on Friday, with the 10-year yield hovering near a one-week high as traders pared safe-haven bond positions stemming from hopes for reduced tension between Italy and the European Commission over the country's debt-laden budget.

Major U.S. stock indexes also lifted bond yields higher on strong corporate earnings. They offset worries about rising borrowing costs, U.S.-China trade tensions and strained relations between United States and Saudi Arabia.

Yields on Italian government debt fell after European Economic Affairs Commissioner Pierre Moscovici said he wanted to reduce tensions with Italy over the country's contentious budget plans. Earlier on Friday, the 10-year Italian yield retreated to 3.57

"That gave the market some relief," Larry Milstein, head of government and agency trading at R.W. Pressprich & Co. in New York said of the latest development between EC and Italy. "That took some of the safe-haven bids out of the market."

Benchmark 10-year Treasury yield yield was 3.200 percent, up over 2 basis point from Thursday when it reached a one-week peak of 3.179 percent. Last week, it reached a 7-1/2 year peak of 3.261 percent.

The Dow gained 0.20 percent and the S&P 500 rose 0.20 percent.

On Thursday, Wall Street share prices tumbled partly on disappointing results from industrial companies.

The Treasury market was roiled this week after the Federal Reserve released minutes on its Sept. 25-26 policy meeting.

Central bankers raised borrowing costs a quarter point, and analysts said some traders dumped interest rate futures after the minutes suggested some policy makers were open to raising short-term interest rates above the "neutral" level of 3 percent.

On Friday, Dallas Fed President Robert Kaplan said the U.S. economy is "basically" meeting the Fed's mandate on employment and inflation.

He said at an event sponsored by the Manhattan Institute another two to three more rate increases would bring borrowing costs into "neutral" territory where it's neither stimulating nor restricting U.S. economic growth.

Technical indicators suggest Treasuries are oversold, but the market faces supply pressure next week due to a planned auction of a combined $108 billion in two-year, five-year and seven-year fixed-rate U.S. government debt.

"These yield levels are probably not going to hold given the sheer amount of supply next week," Milstein said.

Earlier Friday, the National Association of Realtors said U.S. home resales fell in September for a sixth straight months.     

(Reporting by Richard Leong; Editing by David Gregorio and Grant McCool)

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