U.S. Treasury yields inched upward on Wednesday after the Commerce Department's May retail sales report surprised to the upside, while investors positioned for the Federal Reserve's policy communication later in the day.
The benchmark 10-year Treasury yield rose 1 basis point to 4.435%. Shorter-dated notes were slightly firmer, with the 2-year yield - the maturity most sensitive to Federal Reserve rate expectations - climbing 2 basis points to 4.06%.
Data from the Census Bureau showed retail sales increased 0.9% in May. That result followed a downward revision to April's figure, now reported as a 0.4% gain. Economists surveyed had been expecting a 0.5% rise for May.
A portion of May's stronger retail receipts came from higher gasoline spending, which lifted sales at service stations. The report noted gasoline prices had earlier reached four-year highs amid disruption linked to the U.S.-Israeli war with Iran. Those prices have since eased, with the national retail average falling below $4 per gallon this week for the first time since April.
Core retail sales - a narrower measure that excludes autos, gasoline, building materials and food services - advanced 0.7% in May after a 0.5% increase in April. This core reading is the measure that most closely aligns with the consumer spending component of gross domestic product.
Market attention was expected to move toward the Federal Open Market Committee statement scheduled for release at 2 p.m. The statement follows the conclusion of the FOMC meeting - the first convening under Chair Kevin Warsh - and will be followed by his press conference. Traders and investors were positioned to parse any shifts in tone or guidance for indications on the Fed's path for interest rates.
With retail sales stronger than forecast and gasoline-related spending having contributed to the jump, yields moved higher by small margins as markets balanced the incoming data against the near-term policy signal due from the Fed.