Treasuries and Euro

U.S. Treasuries fell, pushing two-year yields to the highest level in a week, as a bigger-than-forecast increase in a measure of retail sales bolstered speculation the Federal Reserve will keep interest rates unchanged next month. Two-year notes led declines as traders bet the Fed's seven rate cuts since September will help the economy emerge from the biggest housing slump since the Great Depression. Import prices rose more than expected last month as the dollar set a record low against the euro.

The yield on the 30-year bond rose 7 basis points to 4.61 percent as oil reached $126.98 a barrel, a record high. Excluding autos, retail sales increased 0.5 percent in April, after a 0.4 percent climb in March, the government said. Futures on the Chicago Board of Trade show a 92 percent chance the Fed will hold its target lending rate at 2 percent on June 25, up from an 86 percent likelihood yesterday. The balance of bets is for a cut of a quarter-percentage point. Traders also see a 43 percent chance the central bank will lift the benchmark rate to 2.25 percent by year-end.