NEW YORK, Sept 16 (Reuters) - U.S. Treasury yields
slipped on Tuesday in a choppy session, retreating from earlier
highs after a flurry of economic data, including a gauge of
retail sales as investors awaited a policy statement from the
Federal Reserve.
Yields briefly extended gains after the Commerce Department said
retail sales rose 0.6% last month, above the estimate of
economists polled by Reuters calling for a rise of 0.2% and
after an upwardly revised 0.6% advance in July, indicating the
consumer remains willing to spend.
"There's this undercurrent of hope out there and it might
even be misplaced ... where people are thinking maybe we'll get
50 (basis points) tomorrow and maybe the Fed's going to be
incrementally more dovish than we think, and oh wait, there's
some retail sales, the economy is still pretty good," said Jason
Ware, chief investment officer at Albion Financial Group in Salt
Lake City, Utah.
"To me as an investor, that's what I want to see. I want to
see a Fed that is lowering rates in a measured way because they
can afford to as opposed to having to cut 50 because they have
to."
Other data from the Labor Department showed import prices
increased 0.3% last month, topping expectations calling for a
decline of 0.1%, after a downwardly revised 0.2% rebound in
July, hinting that domestic inflation could heat up in the
coming months.
The yield on the benchmark U.S. 10-year Treasury note
fell 0.4 basis point to 4.03% after rising to a
session high of 4.064% after the data.
The Fed will make its policy announcement on Wednesday, and the
market has fully priced in a rate cut of at least 25 basis
points, with a roughly 4% chance for an outsized 50 basis-point
cut, according to CME's FedWatch Tool.
A federal appeals court in Washington said on Monday that
Governor Lisa Cook could remain in her job while litigation over
President Donald Trump's effort to fire her proceeds. Also, the
U.S. Senate confirmed Stephen Miran, currently on leave as the
head of the White House's Council of Economic Advisers, to an
open seat on the central bank's seven-member Board of Governors
as Trump attempts to reshape the composition of the Fed.
The yield on the 30-year bond rose 0.4 basis
point to 4.659%.
More supply will come to the market later on Tuesday when
Treasury auctions $13 billion in 20-year bonds.
A closely watched part of the U.S. Treasury yield curve
measuring the gap between yields on two- and 10-year Treasury
notes, seen as an indicator of economic
expectations, was at a positive 51.8 basis points.
The two-year U.S. Treasury yield, which
typically moves in step with interest rate expectations for the
Fed, fell 2.5 basis points to 3.51% after earlier climbing to
3.578%.
The breakeven rate on five-year U.S. Treasury
Inflation-Protected Securities was last at 2.45%
after closing at 2.443% on Monday
The 10-year TIPS breakeven rate was last at
2.371%, indicating the market sees inflation averaging about
2.4% a year for the next decade.