US Treasury prices fell on Thursday as a top US central bank official said the Federal Reserve should raise the nation's overnight interest rates this year and as oil prices jumped ahead of Friday's US retail sales data. San Francisco Fed President John Williams, noting improved labour conditions and rising inflation, told the Washington Post in an interview released on Thursday that the Fed should raise rates this year.
Williams is not a voting member this year at the central bank's Federal Open Market Committee meetings, but his views are largely seen as in line with those of Chair Janet Yellen.
The Fed has been largely silent since releasing a statement after its July 26-27 policy meeting and there has been limited US economic data this week, which gave Williams' comments more weight.
"The only signals that we've gotten out of central banks have really just been from other central banks," said Thomas Simons, money market economist at Jefferies & Co. in New York.
Treasuries were also feeling downward pressure because of the strong rise in oil prices, which surged more than 4 percent during the day.
"There was a lot of activity in oil this morning and that put an awful lot of pressure on inflation expectations," said Jim Vogel, interest rate strategist at FTN Financial in Memphis, Tennessee.
Rising inflation reduces the value of already held Treasuries because future issues will hold higher yields.
Traders had disregarded the rise of oil prices early in the day, Vogel added, "and as it's held that's got people a little bit more concerned and we're seeing some Treasury selling."
Selling also picked up after a solid 30-year Treasury bond auction in the afternoon that followed three-year and 10-year note auctions earlier this week, and with a wave of corporate bond supply.
Companies have raised nearly $30 billion in investment-grade debt this week, bringing the monthly total to $76.9 billion, according to IFR, a Thomson Reuters unit.
"There's definitely supply concession with the 30-year and corporate supply," said Stan Sun, interest rate strategist at Nomura Securities International in New York.
Investors next turn their attention to Friday's release of July US retail sales data, the most significant release of the week. June's numbers far exceeded economists' expectations and a similarly strong report for July could show inflation rising faster than previously expected.
Benchmark 10-year Treasury notes fell 20/32 in price to yield 1.569 percent, up 7 basis points from late Wednesday.