US Treasury yields tick higher after strong retail sales data

U.S. government debt yields rose slightly on Tuesday after the release of stronger-than-expected economic data.

The benchmark 10-year Treasury yield traded around 2.117% while the 2-year rate climbed to 1.86%. The 30-year bond yield advanced to trade at 2.627%.


Retail sales rose 0.4% in June as U.S. households increased purchases of motor vehicles and other goods, the Commerce Department said Tuesday. Economists polled by Reuters expected sales to rise by 0.1%. Excluding food, auto, gasoline and building materials purchases, sales jumped 0.7%.

"The market is turning its attention to things like the debt ceiling, U.S.-China trade talks, and a handful of Fed speeches," Kevin Giddis, head of fixed income capital markets at Raymond James, wrote in an emailed statement.

"While today's economic data doesn't necessarily change what the market expects the FOMC to do later this month (ease by 25 basis points), it does continue to suggest that the U.S. economy isn't about to roll over and play dead."

The better-than-expected data comes at a time when traders expect the Federal Reserve to cut interest rates later this month. Market expectations for a July rate cut are at 100%, CME Group's FedWatch tool shows.

Fed Chair Jerome Powell confirmed those expectations last week. He testified in front of Congress that "crosscurrents" from the ongoing U.S.-China trade war and weaker economic activity overseas are dampening outlook on the U.S. economy.

Powell is scheduled to speak again at 1 p.m. ET on Tuesday at the Bretton Woods 75 Years event in Paris, France.

President Donald Trump on Tuesday again elevated trade uncertainties between the U.S. and China, saying "we have a long way to go" and repeated earlier threats to impose tariffs on $325 billion of Chinese goods.