Treasury 10-year notes rose, pushing the yield down to within three basis points of a one-week low before reports today that economists said will show inflation slowed in January and jobless claims rose last week. Thirty-year yields were within four basis points of a two- week low. The Conference Board’s leading indicators gauge will show the economy expanded at a slower pace in January than in December, according to 54 economists surveyed before the report today. U.S. Treasury Secretary Timothy Geithner is due to testify to the Senate Budget Committee later today and the government is scheduled to sell $9 billion of 30-year Treasury Inflation-Protected Securities, or TIPS. “I would not be surprised if Treasury market bulls come back and try to push yields further down today,” said Marius Daheim, a senior fixed-income strategist at Bayerische Landesbank in Munich. “The CPI figures are poised to rise, even in the core rates, by only a small amount.” Ten-year note yields fell two basis points to 3.60 percent as of 9:15 a.m. in London, according to BGCantor Market Data. The 3.625 percent security maturing in February 2021 rose 6/32, or $1.88 per $1,000 face amount, to 100 7/32. The rate fell to 3.57 percent yesterday, the lowest since Feb. 4. Thirty-year yields were one basis point lower at 4.67 percent. First-time claims for jobless benefits rose last week from the lowest since July 2008, according to a Bloomberg survey of 47 economists before the Labor Department report. The cost of living index rose 0.3 percent in January after rising 0.5 percent the prior month, according to a separate Bloomberg survey. So-called core prices, which exclude food and fuel, were probably 0.1 percent higher for a third month. Leading Indicators A separate report is forecast to show The Conference Board’s gauge of the outlook for the next three to six months rose 0.2 percent in January, less than the 1 percent gain it posted in December. “The labor market is performing below the level that the Fed wants,” said Kazuaki Oh’e, a debt salesman in Tokyo at CIBC World Markets Japan Inc., a unit of Canada’s fifth-largest lender. “That will keep the central bank on hold. The Fed on hold will support bonds.” The Federal Reserve will buy as much as $8 billion of notes today as part of its plan to pump $600 billion into the economy by June 30 in an effort to spur the economy. The central bank plans to buy $6 billion to $8 billion of Treasuries due from May 2018 to February 2021, according to its website. ‘On The Way Up’ Central bank policy makers took a more optimistic view of the economy last month while maintaining their dissatisfaction with job growth as they pressed forward with an expansion of record monetary stimulus, minutes of their January policy meeting released yesterday showed. The Fed cut its benchmark to a band of zero to 0.25 percent in December 2008 and has pledged to keep it low for an “extended period.” Treasury yields are poised to rise, according to John Brynjolfsson, chief investment officer with Armored Wolf LLC hedge fund. “You don’t want to bet on interest rates falling from here,” Brynjolfsson said yesterday in an interview with Carol Massar and Matt Miller on Bloomberg Television’s “Street Smart” program. “They could fall for a week or a month, but the long-term trend for interest rates is on the way up,” said Brynjolfsson, who is based in Aliso Viejo, California. Brynjolfsson spent 19 years at Pacific Investment Management Co., which runs the world’s biggest bond fund, according to the Armored Wolf website. The 10-year yield will advance to 3.94 percent by year-end, according to a Bloomberg survey of financial companies with the most recent forecasts given the heaviest weightings. Treasuries have handed investors a 1.2 percent loss in 2011, while inflation-linked bonds slid 1.6 percent, based on indexes compiled by Bank of America Merrill Lynch. To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net Wes Goodman in Singapore at wgoodman@bloomberg.net. To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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