US Treasury yields rose on Monday despite stock market volatility stemming from rising borrowing costs and geopolitical risks, while the outlook for US economic growth was tempered by weaker-than-expected data on domestic retail sales.
Rising loan rates, which make it more costly for consumers to buy a car or home and for companies to finance their debt, have spurred concerns about the durability of the economic expansion and whether the Federal Reserve may consider a pause in raising interest rates after 2018, analysts said.
US retail sales barely rose in September as a rebound in motor vehicle purchases was offset by the biggest drop in spending at restaurants and bars in nearly two years.
But other details of the report from the US Commerce Department on Monday were upbeat and suggested that consumer spending ended the third quarter with strong momentum, which should provide a boost to economic growth despite anticipated drags from weak exports and a struggling housing market.
Some analysts expected Treasury yields to trade sideways in the near term with monthly data on payrolls and inflation in the rear-view mirror.
"The market will likely settle into its new range after the volatile trading of the past couple of weeks," said Boris Rjavinski at Wells Fargo Securities in New York.
Last week, the benchmark 10-year Treasury yield reached 3.261 percent, which was last seen in May 2011, while the 30-year yield hit a four-year peak at 3.446 percent. They reversed from those levels due to a dramatic sell-off in global equities markets.
The yield on 10-year Treasury notes was up 1.5 basis points at 3.156 percent, while the 30-year yield climbed by the same increment to 3.332 percent.
The government said retail sales edged up 0.1 percent last month, below a 0.6 percent forecast among analysts polled by Reuters. The modest headline figure was mitigated by more upbeat details that suggest resilience in consumer spending.
Safe-haven demand for US bonds seemed muted despite growing tension between Western powers and Saudi Arabia after the disappearance of Saudi journalist Jamal Khashoggi, a critic of that nation's crown prince, analysts said.
Growing US government debt, which is expected to increase in the coming decade to fund a rising federal deficit, is also a long-term driver of US yields.
On Monday, the US Treasury Department said the federal deficit reached $779 billion in 2018 fiscal year, the largest budget gap since 2012.
Investors picked up much of last week's $74 billion in Treasuries supply, but it is unclear whether their appetite for US debt will persist as the supply continues to grow.
This week, the Treasury Department will debut a two-month bill issue worth $25 billion on Tuesday and sell $5 billion in 30-year Treasury Inflation Protected Securities on Thursday.
Asset managers scaled back their bullish positions in 10-year Treasuries last week, while hedge funds reduced their bearish 10-year bond bets, according to data from the Commodity Futures Trading Commission released on Friday.
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