US Treasury yields pulled back from recent highs on Friday as investors parsed a batch of economic data that presented a mixed picture of the economy. The 10-year yield fell to 4.2%, while the 2-year yield declined slightly, steepening the curve modestly.
Retail sales came in softer than expected, suggesting that consumer spending may be losing momentum after a strong start to the year. However, manufacturing activity showed unexpected strength, and initial jobless claims remained low, indicating that the labor market is still tight.
The mixed data has left investors uncertain about the path of monetary policy. Fed officials have stressed that decisions will be data-dependent, leaving markets vulnerable to swings in sentiment as new information becomes available.
Bond investors are also watching the supply calendar closely, with significant issuance expected in the coming weeks. Demand for Treasuries remains strong, particularly from foreign buyers, but concerns about fiscal deficits could pressure yields over the longer term. The market will remain sensitive to inflation data and Fed commentary.