Treasury debt prices slightly extended losses Thursday, with the benchmark yield reaching its highest since late December, after below-average demand in an auction of reopened 10-year Treasury notes.
Following the auction, benchmark 10-year Treasury notes were trading a full point lower in price for a yield of 4.20 percent from 4.08 percent late Wednesday, while 2-year Treasury notes were trading 8/32 lower for a yield of 2.96 percent from 2.82 percent.
In the moments directly following the auction, the 10-year note yield reached 4.22 percent, the loftiest since late December.
The $11 billion 10-year note reopening "was just on the weak side of average," said Lou Brien, market strategist at DRW Trading in Chicago.
Treasury debt prices slid earlier after surprisingly robust U.S. retail sales data and a Federal Reserve official's warning about the need to control inflation accelerated bond market bets for interest rate hikes.
U.S. short term interest rate futures shifted to fully price in a 50 basis point rise in interest rates by October, while the two-year Treasury note's yield rose to near the 3 percent mark, the highest level since early January.
The benchmark 10-year note's yield, which moves inversely to its price, surged to the highest level since late December after the May retail sales report and as global inflation concerns on record food and energy prices take an increasing toll on global bond values.
"The Treasury market can be perceived as breaking down, having reached new highs in yield," said John Spinello, Treasury bond strategist with Jefferies & Co. in New York.
"Concern over the supply is feeding on itself," ahead of the 10-year reopening, Spinello said, adding that the 10-year yield could soon rise to the 4.25 percent to 4.30 percent range.