By Karen Brettell and David Randall
       NEW YORK, Aug 15 (Reuters) - Benchmark 10-year U.S.
Treasury yields hit an almost 10-month high on Tuesday before
quickly dipping, after data showed July retail sales rose more
than expected.
    Retail sales jumped 0.7% last month, above the 0.4%
forecast. June data was revised higher to show sales rising 0.3%
instead of the previously reported 0.2%.
    Americans boosted online purchases and dined out more,
suggesting the U.S. economy continues to expand and putting
recession fears at bay. Resilient U.S. data has also boosted
expectations that the Federal Reserve may hold rates higher for
longer to bring inflation down closer to its 2% annual target.
    Markets have priced in "a considerably higher probability
that we stay around the current terminal rate for a longer
period than was previously expected," said Jonathan Cohn, head
of U.S. rates desk strategy at Nomura in New York.
    Benchmark 10-year yields hit 4.274%, the highest
since Oct. 24, before falling to 4.197% in early afternoon
trading. 
    Two-year yields reached 5.024%, the highest since
July 7, before retreating to 4.940%. The interest rate-sensitive
notes are holding below the 5.120% yield reached on July 6, the
highest since June 2007.
    The inversion in the closely watched yield curve between
two- and 10-year notes narrowed to minus 75 basis
points.
    The Fed will release minutes from its July 25-26 meeting on
Wednesday. The Federal Reserve Bank of Kansas City's annual
symposium in Jackson Hole, Wyoming, on Aug. 24-26 could also
deliver clarity on Fed thinking.
    Futures markets are now pricing in a nearly 35% chance that
the Fed's benchmark rate will be above its current range at its
December meeting, up from a roughly 25% chance seen a month ago.
    The market is evaluating "how far the sell-off can run"
before the Fed releases minutes of its previous meeting Thursday
afternoon, said Benjamin Jeffery, U.S. rates strategy at BMO
Capital Markets. 
    
        August 15 Tuesday 1:32PM New York / 1732 GMT
                               Price        Current   Net
                                            Yield %   Change
                                                      (bps)
 Three-month bills             5.29         5.4519    0.010
 Six-month bills               5.2825       5.5179    -0.016
 Two-year note                 99-166/256   4.9395    -0.026
 Three-year note               99-74/256    4.6317    -0.011
 Five-year note                98-254/256   4.3528    -0.002
 Seven-year note               98-60/256    4.296     0.008
 10-year note                  97-104/256   4.1953    0.013
 20-year bond                  92-28/256    4.4809    0.022
 30-year bond                  97-4/256     4.3031    0.022
                                                      
   DOLLAR SWAP SPREADS                                
                               Last (bps)   Net       
                                            Change    
                                            (bps)     
 U.S. 2-year dollar swap         0.00         0.00    
 spread                                               
 U.S. 3-year dollar swap         0.00         0.00    
 spread                                               
 U.S. 5-year dollar swap         0.00         0.00    
 spread                                               
 U.S. 10-year dollar swap        0.00         0.00    
 spread                                               
 U.S. 30-year dollar swap        0.00         0.00    
 spread                                               
                                                      
 
        

 (Reporting by Karen Brettell; Editing by Emelia
Sithole-Matarise and Richard Chang)