July 15 (Reuters) – U.S. 10-year Treasury notes edged higher in Asian trading on Thursday, extending gains made the previous day due to weak retail sales data and a pared-back economic outlook from the Federal Reserve.

* Ten-year notes rose about 4/32 in price to yield 3.034 percent US10YT=RR, down 1 basis point from late U.S. trading on Wednesday. Ten-year note futures rose 3/32 to 122-10.5/32 TYv1.

* Two-year notes were unchanged in price to yield 0.6089 percent US2YT=RR, down about 1 basis point from late New York trading and hovering near a record low of 0.590 percent hit in late June. On Wednesday, the two-year yield had slid nearly 7 basis points for its biggest one-day drop in about six weeks.

* While the 10-year yield may head lower in the near term, a sustained drop from current levels seems unlikely, said Junji Kojima, senior deputy manager of Sompo Japan Insurance’s global securities investment department.

* “If the economy weakens too much, that may spur speculation about the possibility of further monetary easing steps and could give a lift to equities,” Kojima said.

* On the other hand, if the U.S. economy holds up relatively well that could also bode ill for Treasuries, which look a bit over-bought, Kojima said.

* Minutes from the Fed’s June policy meeting showed officials felt they should be ready to consider additional steps to boost the U.S. economy if an already softening outlook took a noticeable turn for the worse. [ID:nN14148574]

* Data on Thursday showing that China’s economy slowed in the second quarter contained no surprises, and gave little reason to think that China’s economy was headed for a sharp slowdown that could prompt market players to revise down their outlook for the global economy, said Kojima at Sompo Japan. [ID:nTOE66D06L] (Reporting by Masayuki Kitano; Editing by Michael Watson)