Indirect bidders, including foreign central banks, took the smallest percentage of a 30-year offering since February 2015.

The 30-year yield jumped to a session high following the sale and was last up 7.1 basis points to 2.642pc.

Analysts attributed the weak demand to the high price of the maturity going into the sale.

Earlier, the bond shrugged off the US Labor Department report that its consumer price index excluding the volatile food and energy components in June posted the largest increase since January 2018.

Inflation has consistently undershot the Fed's target.

The central bank has cited that as a risk as it weighs cutting interest rates in July for the first time since 2015.

The market still expects an interest rate cut at the end of July.

"The Fed has left itself two paths to a rate cut. One is inflation-shortfall-based and that is fading with this morning's CPI data.

The other is insurance-based," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott.

"It seems policymakers are more focused on an insurance rate cut - insurance against future growth shortfall."

That explains the market's muted reaction. The two-year yield, a proxy for market expectations of changes in rate policy, rose modestly, last up 2.8 basis points to 1.854pc. The benchmark 10-year was last up 6.3 basis points to 2.124pc.

"From the Fed's perspective, I don't think it really mattered. It doesn't really matter what numbers that come in between now and July 31 - something dramatic would have to happen.

A slight uptick in core CPI isn't going to do the trick," said Kevin Flanagan, head of fixed income strategy at WisdomTree.

The chance of a 50-basis point cut fell on Thursday to 20.4pc from 29.2pc on Wednesday, according to CME Group's FedWatch tool.

A 25-point cut has been fully priced in by the market, and was not altered by the inflation report.