LONDON: US Treasury yields rose in Europe on Wednesday, breaking above a key technical level, after upbeat retail sales data the previous day led investors to bet the US Federal Reserve may delay further steps to stimulate the economy.
Traders reported one big seller in early trade, which in thin markets pushed 10-year yields around 5 basis points higher and through the 100-day moving average at around 1.74 percent.
"There's been selling out of Asia earlier and overnight," one trader said. "Those accounts are loaded up on Treasuries and just taking a little bit off."
Benchmark 10-year US Treasury yields were 4.5 bps higher at 1.78 percent, with T-note futures down 10/32 at 132-26/32.
Whether the higher yields are sustained is likely to depend on how this week's data releases compare to forecasts .
Later on Wednesday, US consumer inflation figures are expected to show price pressure remains benign, while industrial production is forecast to pick up pace.
"The risk is that there is a reasonable amount of decent data, equities perform and fixed income gets hit," a second trader said. "We'd expect to see some support coming in around current levels but if we break 1.80 percent then you're looking at 1.86 percent - the 200-day moving average."
Expectations remain that the Fed could eventually embark on a third round of quantitative easing through bond purchases, or QE3, but a steady run of better-than-forecast data may mean those steps come later -- or not at all. Data on Monday showed US retail sales rose 0.8 percent in July, beating a consensus estimate for a 0.3 percent gain.
"The main source of weakness in rate markets is stemming from US Treasuries," Credit Agricole strategist Peter Chatwell said in a note. "US data is continuing to surprise to the upside and, in combination with the strength of US equity markets, serving to reduce the case for QE3."
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