US yields slip after brief spike following solid batch of US data

U.S. Treasury yields edged lower on Thursday, briefly spiking after a batch of data showed the world's largest economy remained on a stable footing, supporting the Federal Reserve's patient stance on resuming its monetary easing policy this year.

"Despite an initial spike in yields, the bulk of the move has retraced as the market continues to settle into an all-too-familiar range for U.S. rates," Ian Lyngen, head of U.S. rate strategy at BMO Capital wrote in e-mailed comments after the data.

The benchmark 10-year yields were last down 1.2 basis points (bps) at 4.443% US10Y. They rose as high as 4.495% immediately after the data's release.

U.S. 30-year yields also initially rose after the data, but were last 2.2 bps lower at 4.992% (US30YT=RR).

On the short end of the curve, U.S. two-year yields, which track interest rate expectations, rose 2 bps to 3.905% (US2YT=RR).

Thursday's data showed that retail sales rose more than expected in June, advancing 0.6% last month after an unrevised 0.9% drop in May. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, edging up 0.1%.

"Despite uncertainty about the future and weak readings on consumer confidence, their response has been to buy more, different things rather than buy fewer," wrote Tom Simons, chief U.S. economist, at Jefferies in emailed comments after the data.

"Consumers did not react to the tariff announcements or the resultant decline in financial markets or the weakness in business and consumer sentiment with defensive recoil. Instead, they went out and bought big ticket items with an opportunistic view."

Initial jobless claims also were better than expected, dropping 7,000 to a seasonally adjusted 221,000 for the week ended July 12, data showed. Economists polled by Reuters had forecast 235,000 claims for the latest week.

Another unexpectedly positive data was the Philadelphia Fed business conditions index for July, rose to 15.9, a five-month high, up from a June reading of -4.0. The consensus forecast was for an index -1.0.

U.S. import prices were also lower than expected, rising just 0.1% in June, compared with forecasts for a 0.3% rise, suggesting mild tariff-related impact. In the 12 months through June, import prices fell 0.2%, matching May's decrease.

"The economic indicators this morning...suggested the economy was solid going into Q3," said Stan Shipley, fixed income strategist, at Evercore ISI in New York.