NEW YORK: US Treasury yields gained on Tuesday after data showed that US retail sales increased more than expected in June, adding to recent evidence that the economy is improving.

The Commerce Department said retail sales rose 0.4% last month as households stepped up purchases of motor vehicles and a variety of other goods. Economists polled by Reuters had forecast retail sales edging up 0.1% in June.

"There's a lot of upside surprises in the details," said Tom Simons, a money market economist at Jefferies in New York.

"This is certainly bond negative because it suggests that the economy is still doing really well and the Fed is about to add some more fuel to the fire, and maybe we do get some inflation," Simons said.

Benchmark 10-year notes fell 13/32 in price to yield 2.138%, up from 2.092% late on Monday.

The Federal Reserve is seen as certain to cut rates when it meets later this month, even as the US economic picture improves.

Records from the US central bank's latest meeting, released last week, showed increasing fear that a US-China trade war that has done little to directly restrain growth is indirectly causing businesses to hold back on buying equipment, giving workers a raise and hiking their prices.

Interest rate futures traders are pricing in a 73% chance of a 25 basis point cut and a 27% likelihood of a 50 basis point cut, according to the CME Group's FedWatch tool.

Numerous Fed officials are due to speak on Tuesday, including Chairman Jerome Powell. Their comments will be evaluated for further clues on interest rate policy.

The US yield curve has steepened in the past week as the US economic picture improves.

Data earlier this month showed that US job growth rebounded strongly in June while underlying consumer prices also gained by the most in nearly 1-1/2 years in the month.

The yield curve between two-year and 10-year notes has steepened to 26 basis points, from 15 basis points last Tuesday.