Reuters | U.S. Treasuries rebounded Friday from sharp losses during the previous session as weak retail sales data revived safe-haven buying of government bonds. U.S. retail sales fell unexpectedly in May for the first time since September, adding fuel to fears the economy was fizzling after a short recovery and enhancing the allure of less risky assets such as Treasuries.

The report by the Commerce Department that retail sales fell 1.2 percent
in May came as investors were already breathing a sigh of relief after
this week’s $70 billion in bond auctions, all of which attracted strong
demand even though the market had rallied to expensive levels in recent
weeks.

The weak retail sales number appeared to validate much of the recent
rally in Treasuries, which was inspired by global investment fears
generated by Europe’s fiscal crisis.

“The disappointing retail sales number today is certainly pushing bond
prices higher,” said Keith Blackwell, U.S. interest rate strategist at
RBC Capital Markets in New York.

The benchmark 10-year note was last up 20/32 in price, yielding 3.25
percent versus Thursday’s close of 3.33 percent.

The 30-year long bond rallied more than a point in price and was last up
1-10/32 in price, yielding 4.16 percent versus Thursday’s close of 4.24
percent.

Relief over the passing of this week’s bond auctions was apparent
throughout the fixed income market, particularly since the results
showed strong demand for Treasuries even at high prices.

“The auctions went pretty well this week, which certainly showed that
there is enduring demand for the long end of the Treasury curve,” said
Blackwell.

Treasuries out-performed private-sector credit based on the interest
rate swap market, where spreads mostly widened after narrowing amid the
supply.

Long-dated Treasuries reversed the under-performance the exhibited
during the auctions, causing the yield curve to flatten.