Macroeconomic News

By Chris Reese and Luciana Lopez

NEW YORK, Aug 10 (Reuters) - U.S. Treasury debt prices

advanced on Friday, regaining some ground lost earlier in the

week as worries about global growth fueled safe-haven buying,

with investors looking to data on U.S. inflation and retail

sales next week.

Investors also bought U.S. government debt in the wake of

auctions of $72 billion of coupon-bearing securities this week

that made up the Treasury's quarterly refunding.

'It seems to be another risk-off type of move. The big

component was the weak data out of China, which exacerbated

fears of a global slowdown,' said Kim Rupert, managing director

of global fixed income analysis at Action Economics in San

Francisco.

China's exports grew 1.0 percent year-on-year in July, well

below market expectations of an 8.6 percent rise, while imports

grew 4.7 percent, against a 7.2 percent forecast.

Safe-haven buying supported U.S. government debt. The

benchmark 10-year U.S. Treasury note rose 13/32 in price to

yield 1.652 percent, down from 1.69 percent late Thursday.

The 30-year Treasury bond climbed 18/32 in

price, while its yield slipped to 2.742 percent, down from a

high yield of 2.83 percent in an auction of $16 billion of the

bonds on Thursday.

Next week investors will be looking to data on July U.S.

retail sales, expected to rise 0.3 percent, and consumer prices,

expected to gain 0.2 percent, among other economic indicators.

'They generally should be fairly positive data,' said Kevin

Cummins, an economist at UBS Securities in New York. 'That

should add to some better tone of data that we've gotten

recently.'

But clouding the outlook will be the lingering question of

whether the U.S. Federal Reserve could launch another round of

quantitative easing to prop up the sluggish economy, Cummins

said.

The Treasury's sales of 3-year, 10-year and 30-year

securities this week were met with tepid demand.

'Treasuries have had a bit of a tough week, and you're

seeing a bit of a comeback here, giving buyers a bit of a

chance,' Rupert said, adding that 'the auctions are out of the

way and that is helping.'

Safe-haven interest also supported Treasuries due to worries

over the debt crisis in Europe and fears that Spain and Italy

may require massive financial bailouts. Economists said even

stalwart Germany was stalling economically and could fall into

recession in the second half of this year.

Uncertainty over when the European Central Bank will resume

bond purchases and how effective this will be in lowering

Spanish and Italian yields, and easing the euro zone's debt

crisis, has underpinned safe-haven Treasuries.

Despite higher prices on Friday, benchmark yields are up for

the week from 1.57 percent late last Friday, and have been

rising steadily since touching a record low of 1.38 percent on

July 25.

'We think we can go a little bit higher from here in terms

of how high Treasury yields can go, but there is going to be a

cap because of everything happening in the world,' said Scott

DiMaggio, director of global fixed income with AllianceBernstein

in New York.

'Yields were driven to historical lows in the U.S., Germany,

the U.K. and several other countries, so the market got itself

very long,' DiMaggio said, adding that comments from ECB

President Mario Draghi committing to take whatever measures

necessary to save the euro zone had undermined Treasury debt

prices and pushed yields higher in recent weeks.

However, global economic uncertainty will likely mean yields

will remain at historic lows in coming months, DiMaggio said.

'Treasuries are going to remain anchored,' he said. 'Can we

get to 1.75 percent? Can we get to 2 percent? Yes, probably, but

we think 2 percent would be a cap.'



(Additional reporting by Marius Zaharia in London; Editing by

Dave Zimmerman and Jan Paschal)

(luciana.f.lopez@thomsonreuters.com)(+1 646 223 6319)(Reuters Messaging: luciana.f.lopez.thomsonreuters.com@reuters.net)

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