Treasuries Rise as Weak Retail Sales Dents Fed Hike Bets

U.S. Treasury prices climbed after July retail sales unexpectedly declined, coming in well below forecasts for a modest increase. Treasury futures hit fresh session highs, with shorter-dated bonds leading the move. Front-end yields dropped about 3 basis points, while the 2s10s curve steepened roughly 2.5 basis points as longer-term yields stayed slightly higher on the day.

The weak consumer data trimmed expectations for Federal Reserve rate hikes. Overnight index swaps now price only about 8 basis points of tightening for the September meeting, and roughly 20 basis points for the full year, down from 23 basis points previously. The shift suggests investors see less risk of further rate increases as softer demand signals emerge.