That happened because the inputs were not really 10.52 and/or 10.99, as can be verified by pressing either [f] [PREFIX] or [f] [FIX]  to see all the digits. Since your display was set to FIX 2 mode, all the subsequent digits were hidden, but were still there, and had an effect on the result.
Example: In FIX 2 mode, 10.516 is displayed as 10.52 (but is still 10.516 internally), and 10.986 is displayed as 10.99, but when they are added together, the result will be 21.502 which will be displayed as 10.50 (which matches the result you saw).
Another possibility is that you were in FIX 1 mode, in which case the result would be displayed as 21.5 (with all subsequent digits suppressed).
Disclaimer: I don't work for HP. I'm just another happy HP calculator user.