TORONTO (Reuters) - The Toronto Stock Exchange's main index closed higher as a retreat by US bond yields and some mixed economic news helped calm investor worries over inflation and rising interest rates.The S&P/TSX composite index closed up 94.62 points, or 0.7 percent, at 13,798.50, after plunging 437.81 points over the previous two sessions.

All 10 of the TSX index's main groups were up. For the week, the TSX ended down 0.02 percent, after hitting a record closing high of 14,146.74 on Monday.

The downturn that followed was triggered by concerns over rising interest rates, and the outlook for global growth amid higher borrowing costs, after the European Central Bank hiked rates by 25 basis points to 4 percent to combat inflation in the face of a red-hot economy.

The ECB also signalled its moves were not finished after eight increases in the past 18 months.

The interest-rate-sensitive financial sector was up one percent after the benchmark 10-year US treasury note, which topped 5.25 percent overnight for the first time in over a year, began to pull back.

"The key thing the market was focusing on was the 10 year treasury, which got up to 5.25 percent overnight and it's tumbled around 13 or 14 percent from those highs," said Fergal Smith, managing market strategist at Action Economics.

"Psychologically, it's where the Fed's target overnight rate is, 5.25 percent," he said.

Royal Bank of Canada gained 87 Canadian cents, or 1.6 percent, to C$56.76, and Toronto Dominion Bank rose 87 Canadian cents, or 1.2 percent, to C$72.94

Meanwhile Canadian economic data showed that the economy was still moving forward at a decent pace.

Robust construction of condominiums and apartments helped housing starts rise 8.4 percent in May, topping analysts' expectations, Canada Mortgage and Housing Corporation said.