TREASURIES-Rally on solid 30-yr auction, weak retail sales

* Surprise retail sales drop revived safe-haven bid

* Treasuries rally on well-bid 30-yr bond auction

* Bond auction concludes $75 billion Treasury refunding

* Jobless claims rose more than expected in week (Updates prices, comment, adds swaps table)

By Ellen Freilich

NEW YORK, Aug 13 (Reuters) - Weak reports on U.S. jobs and retail sales and a well-bid 30-year Treasury bond auction drove U.S. government debt prices higher on Thursday, a day after the Federal Reserve said the economy showed signs of leveling out.

The reports on retail sales and jobless claims rekindled fears about the vigor of an economic recovery, damping interest in stocks and other risky assets and spurring demand for safer investments, including Treasuries.

"The retail sales report reminded people of how sluggish the economy could be," said Cary Leahey, economist at Decision Economics in New York. "That led to a good bid for the 30-year auction and once that was done, you had a generalized rally."

The 30-year Treasury bond auction concluded the Treasury's $75 billion quarterly refinancing and demonstrated investors' continued interest in U.S. government debt.

In late trade, the 30-year bond US30YT=RR price was up 1-28/32. Its yield fell to 4.43 percent from 4.54 percent late on Wednesday, also the high yield at Thursday's bond sale.

Ten-year Treasury notes were up a point, their yields US10YT=RR falling to 3.61 percent from the high yield of 3.73 percent at Wednesday's $23 billion 10-year sale.

"The crunch time for Treasury issuance is basically passing," said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York.

When the Fed ends its sequence of Treasuries purchases in October, the absence of those purchases will be more than offset by the need for the government to sell less debt in fiscal year 2010 than it did in fiscal year 2009, LaVorgna said. The 2010 fiscal year begins Oct. 1.

"What people who worried about supply are learning is that it's the economic cycle that really drives yields," LaVorgna said. "That's why the retail sales report was so important; it made people worry that the economy will weaken again."

More workers than expected filed for initial unemployment benefits last week and data showed total retail sales slipped 0.1 percent in July after rising 0.8 percent in June.

Auto sales got a boost in July the government's "cash for clunkers" program, designed to spur sales of new fuel-efficient cars. Excluding motor vehicles and parts, retail sales fell 0.6 percent in July after rising 0.5 percent in June.

In the 30-year bond auction, the bid-to-cover ratio, a gauge of demand, was 2.54 at Thursday's long bond sale, well above average for auctions of this type. Indirect bids, which include those from a critical group of buyers -- foreign central banks -- took 48 percent of the auction, also above average.

The long bond yield, which moves inversely to its price, has risen from record lows near 2.5 percent in December. (Editing by Leslie Adler)