NEW YORK (CNNfn) - Treasury securities finished mixed Tuesday as money fled bonds and moved into shorter-dated maturities, after fresh government data showed the economy may be slowing enough to keep the Federal Reserve from raising borrowing costs this month.
Retail sales fell 0.3 percent in May, the government said Tuesday. That's well below Wall Street expectations for a flat reading and boosted hope that interest rates, which were raised six times in the last year, can't go much higher.
"With the reduced likelihood of rate hikes, money is being shifted out toward the short end of the curve where yields are higher," said Tony Crescenzi, bond analyst at Miller Tabak & Co.
Just before 3:15 p.m. ET, the price of the one-year Treasury bill rose 3/32 to 99-5/32. Its yield, which moves in the opposite direction form its price, rose to 6.59 percent.
If rates hold steady as many now believe, yields won't fall, guaranteeing the relatively high return of Treasury bills.
At the same time, analysts said money fled bonds, were yields are lower, as traders scrambled to reverse bets that yields between long- and short- dated Treasurys would move closer together.
"A lot of curve flattening trades had to be reversed," said Kevin Flanagan, money market economist at Morgan Stanley Dean Witter.
The price of the 30-year bond tumbled 1 full point to 104-8/32. Its yield rose to 5.94 percent from 5.87 percent Monday.
Consumer take a break
Analysts said the government report on retail sales indicates that consumer spending is slowing under the weight of six Federal Reserve interest rate hikes over the last year. At the same time, major U.S. market indexes are all down year-to-date, a phenomenon that economists say slows spending.
"This is very good evidence that the interest rate hikes are working," Lynn Reaser, chief economist at Bank of America Asset Management Group, told CNNfn's Before Hours. "I think the Fed will stay on hold.
In a speech Tuesday, Fed Chairman Alan Greenspan made no mention of interest rates. His comments on productivity to the New York Association for Business Economics come two weeks ahead of the Fed's next policy-making meeting.
Recent economic data have suggested that the central bank's six rate hikes in a year are taking effect, giving investors hope that credit won't get much tighter. On Friday, a report showed that producer prices were flat in May.
But the week's most import inflation gauge comes Wednesday with consumer price figures for May. The Consumer Price Index is seen rising 0.2 percent, following a 0.1 percent gain the prior month.
"The odds of a rate hike at the Fed's next meeting is now slim to none," Crescenzi said. "Only a horrid CPI tomorrow can alter the outcome."
Dollar mixed
The dollar edged lower against the euro Tuesday but was little changed versus the yen.
Just before 3:15 p.m. ET, the euro rose to 96.10 cents, from 95.39 cents Monday. The dollar traded at 106.90 yen, unchanged from Monday.
Still, analysts cited no fundamental news behind the trading action, calling the dollar's weakness well within its recent range.
"Although a bit lower across the board this morning, the U.S. dollar continues to adhere to its recent ranges against the world's major currencies," Alex Beuzelin, currency strategist at Ruesch International, wrote in a note to clients Tuesday.
At the same time, the euro has gained in the past few weeks after falling below 90 cents this spring. Still, the regional currency is well below the $1.16 mark where it began trading in January 1999. 
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