Updated from 10:44 a.m. EST

Treasuries jumped Tuesday after weaker-than-expected retail sales data tempered the inflation fears that stemmed from a string of robust economic reports at the start of the year.

The 10-year benchmark note gained 18/32 of a point to yield 4.69%, and the 30-year bond soared 27/32 to yield 4.71%.

The five-year added 13/32 to yield 4.67%, and the two-year rose 5/32 to yield 4.64%. Bond prices and yields move in opposite directions.

"We have been leaning a little more towards the bullish side in anticipation of some weakness in the data because we had a very steady stream of strong data from January," says Bulent Baygun, head of U.S. fixed-income strategy at Barclays Capital. "January will turn out to be an aberration driven primarily by very good weather."

The Commerce Department said retail sales fell 1.3% last month, compared with economists' consensus expectation for a 0.9% decline. Meanwhile, January's gain was upwardly revised to a 2.9% advance from 2.2%.

Sales minus autos fell by 0.4%, nearly in line with Wall Street's estimates for a 0.5% dip. January's sales, excluding car sales, were revised up to 2.6% growth from 2.2%.

The bearish numbers were the catalyst the market needed to fire up a rally that bond strategists including David Ader at RBS Greenwich Capital have seen brewing since the yield curve came out of its inversion last Wednesday.

Still, Ader says the rally isn't necessarily the start of a bullish trend. "We could readily make strong arguments both ways," he says.

Ader says rising prices look like a simple bounce amid oversold conditions, but they could be more meaningful if data come in softer overseas and in the U.S. and if Federal Reserve officials stay away from hawkish statements.

A slew of economic reports remain for this week, including Wednesday's readings on foreign Treasury buying and the Fed's "beige book" report on economic activity. The closely watched CPI report, housing starts and industrial-production numbers will be released later in the week.

"A lot has been priced in, in terms of expectations for continued strength, because of how strong things looked in January," says Baygun. "So markets will be very vulnerable to signs of weakness in the economy going forward."

The fed funds futures contract shows that traders have fully priced in a 25-basis-point rate increase to 4.75% at the Federal Open Market Committee's March 28 meeting. Traders see a 90% chance that the overnight lending rate will hit 5% in May.

Economists at Morgan Stanley now expect rates to reach 5.25% by September, up from their previous forecast for 5%. The firm joins Merrill Lynch, Lehman Brothers, Citigroup Global Markets and Bear Stearns in raising estimates over the past few weeks.

All of these firms, along with Barclays and RBS Greenwich Capital, are among the 22 primary U.S. government securities dealers that trade with the Federal Reserve's New York branch. Primary dealers are required to participate in Treasury auctions.

However, Baygun points out that the average retail sales number for the past two months -- a 0.8% gain -- isn't disastrous, and that an economic slowdown isn't taking shape. "But runaway or explosive growth as indicated by the January numbers is not in cards either," he says.

Separately, the Commerce Department said the current account deficit widened to a record $224.9 billion in the fourth quarter. The current account is the broadest measure of trade, and the growing gap threatens to undermine economic strength.

Recent oversold conditions worldwide also boosted the Treasury market, which was bid up overnight ahead of the data. Tuesday's gains follow a selloff in Treasuries that pushed the 10-year yield to its highest level since June 2004.

Bond prices in the eurozone firmed after a widely watched barometer of investor and business confidence declined more than expected. In Japan, bonds bounced as relatively higher yields finally found buyers.

In other economic news, January business inventories rose by 0.4%, compared with an expected 0.3% gain, while December was revised to a stronger 0.8% from 0.7%. Business sales rose by 1.3%, resulting in a record low for the inventory-to-sales ratio at 1.24 months.