By Paul Dobson Jan. 19 (Bloomberg) -- U.S. Treasuries snapped two days of gains as a record jump in the U.K. inflation rate dented demand for fixed-income securities. The yield on the 10-year note climbed from its lowest in four weeks. U.K. consumer prices rose 2.9 percent from a year earlier, 1 percentage point more than in November, the Office for National Statistics said today in London. Treasuries advanced earlier before a report that economists said will show investors outside the U.S. bought a net $27.5 billion of the nation’s long-term notes, bonds and stocks in November, up from $20.7 billion in October. “If you are a growth bull then any evidence of inflation is very bad news for bonds,” said Luca Jellinek, a senior interest-rate strategist in London at ANZ Banking Group Ltd. The yield on the 10-year note was at 3.68 percent as of 7:15 a.m. in New York, according to BGCantor Market data. It fell earlier to 3.64 percent, the lowest since Dec. 21. The 3.375 percent security due November 2019 was priced at 97 16/32. The U.K. December inflation rate exceeded the 2.6 percent median forecast in a Bloomberg News survey of 30 economists. The 1-point jump in the rate was the biggest since comparable records began 13 years ago. On the month, prices rose 0.6 percent, double the median forecast of 27 economists. Yields Fall The U.S. consumer-price index rose 0.1 percent in December, less than forecast, following a 0.4 percent gain in November, Labor Department figures showed Jan. 15. Rising inflation erodes the value of the fixed payments from debt and may make it more likely that central banks will increase borrowing costs. Ten-year yields have declined 15 basis points this year amid indications the economic recovery is yet to take hold. Sales at U.S. retailers unexpectedly fell in December, Commerce Department figures showed last week. A slowing of global economic growth will push Treasury yields lower, according to Mike Zelouf, who helps oversee $506.4 billion as the London-based director of international business at Western Asset Management Co. “Western Asset does not expect a long period of recovery,” Zelouf wrote in a press release today. Long-term yields will fall faster than those on shorter maturities, he wrote. Ten-year notes yielded 2.78 percentage points more than two-year Treasuries, from 2.81 percentage points on Jan. 15. The spread widened to a record 2.90 percentage points on Jan. 11. Depending on Foreigners President Barack Obama is depending on investors outside the U.S., who hold about half of the nation’s record $7.27 trillion in marketable debt, as he borrows record amounts to fund government deficits and economic-stimulus plans. The government’s $787 billion economic rescue plan contributed to the record $1.4 trillion deficit in fiscal year 2009, which ended in September. Foreign investors have added to their Treasury holdings for six straight months. European governments are also increasing the amounts they borrow, and the deluge that left investors with the lowest relative returns since 1995 will continue for seven years, say officials from Frankfurt to Dublin to Helsinki. A Bloomberg survey of 11 euro-area finance officials showed that eight forecast it will take at least until 2015 to bring the region’s debt sales down to the levels before the collapse of Lehman Brothers Holdings Inc. in September 2008. Four said it may require as much as a decade. The average prediction was that bond sales won’t return to those levels until 2017. To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net;

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