Bonds Mostly Higher as Traders Seek Safety

Treasury debt prices mostly rose on Thursday in safe-haven buying as investors continued to fret over whether government rescue plans for the financial industry would be effective, and stocks fell.

Long bonds eased slightly however, as traders whittled at prices ahead of an auction of the 30-year notes later in the day.

"Stocks opening was very weak, and bonds are benefiting," said Andrew Brenner, senior vice president of MF Global in New York.

Benchmark 10-year Treasury notes, newly auctioned on Wednesday, were yielding 2.76 percent from a high yield of 2.82 in the auction, while the two-year note was trading 2/32 higher in price for a yield of 0.88 percent from 0.91 percent late on Wednesday.

Early in the day, Treasurys pared some price gains after data showed an unexpected rise in January retail sales and a drop in the number of workers filing new claims for unemployment benefits, although the claims were still higher than expected.

Much of the focus remained on the auction of $14 billion of 30-year notes later in the day. The long bond was trading 3/32 lower in price for a yield of 3.46 percent.

"Once we get through the supply, I expect this rally to continue. We are looking at a move back to 2.50 percent on the 10-year yield in the next few weeks," said Jim DeMasi, chief fixed-income strategist at Stifel Nicolaus & Co. Inc. in Baltimore.

Government data showed total retail sales rose 1 percent in January, advancing for the first time in seven months, after slumping by a revised 3 percent in December. Analysts polled by Reuters had forecast January retail sales to fall by 0.8 percent.

Also, the Labor Department said initial claims for state unemployment insurance benefits slipped 8,000 to a seasonally adjusted 623,000 in the week ending Feb. 7. Analysts polled by Reuters were expecting 610,000 claims.

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