By Wes Goodman Feb. 3 (Bloomberg) -- Treasury 30-year yields were within five basis points of a nine-month high before a government report today that analysts said will show the biggest part of the U.S. economy is growing. Global bonds have dropped for the past five months as investors sought higher yields outside of the debt markets. Lisa Emsbo-Mattingly, director of asset allocation research at Fidelity Investments, and Federal Reserve Governor Elizabeth Duke both said the slowdown of inflation may be about to end. “Yields will rise” in developed nations, said Tsutomu Komiya, who invests in U.S. debt in Tokyo for Daiwa Asset Management Co., which oversees the equivalent of $104.1 billion and is part of Japan’s second-biggest brokerage. “The global economy is gradually improving.” The 30-year Treasury yielded 4.61 percent as of 6 a.m. in London, BGCantor Market Data showed. The 4.25 percent security due in November 2040 traded at a price of 94 1/8. The yield climbed to 4.66 percent yesterday, the highest since April 27. An index of bonds around the world has handed investors a 2.3 percent loss since the end of August, Bank of America Merrill Lynch indexes show. The five-month slide is the longest since the data began in 2002. The MSCI All Country World Index of stocks returned 23 percent in the period. The Institute for Supply Management’s non-manufacturing gauge held at 57.1 last month, matching December’s reading as the highest since May 2006, according to a Bloomberg survey of economists. A number above 50 signal expansion for the index, which covers about 90 percent of the economy. The dollar gained for a second day against the euro as the Associated Press reported gunfire in Cairo and Al Jazeera network showed bodies being dragged along a street. The U.S. currency strengthened 0.1 percent to $1.3797 per euro. Inflation Outlook The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, has widened to 2.34 percentage points from 2010’s low of 1.47 percentage points in August. The five-year average is 2.09 percentage points. “The inflation rate is bottoming and, if the U.S. expansion continues into 2011, we may begin to see core inflation creep up,” Emsbo-Mattingly wrote in a report on Fidelity’s website yesterday. The Boston-based fund management company oversees $1.59 trillion. The Fed’s Duke said most gauges show inflation is drifting down. “We may be getting to the end of that,” she said, speaking yesterday at an event in Chapel Hill, North Carolina. Consumer Prices U.S. consumer prices excluding food and energy costs rose 0.8 percent in December from the year before, the Labor Department said Jan. 14. The gain was 0.6 percent in October, a record low based on department figures that start in 1958. The Fed is scheduled to buy $7 billion to $9 billion of Treasuries due from August 2016 to January 2018 today as part of its plan to spur the economy, according to its website. Financial markets in China, Hong Kong, South Korea, Singapore, Taiwan and Vietnam were shut today for the Lunar New Year holiday. Treasuries fell for a third day yesterday as the government said it will sell $72 billion of notes and bonds next week and a private report indicated the economy is poised to add jobs for a second month. The U.S. will auction $32 billion of 3-year debt, $24 billion of 10-year notes and $16 billion of 30-year bonds in daily offerings that begin Feb. 8. The totals, which matched the forecast in a Bloomberg News survey of 12 of the Federal Reserve’s primary dealers, are the same as at the previous refunding in November. Payroll Data Ten-year yields reached the highest level in seven weeks yesterday after ADP Employer Services said U.S. companies added more jobs in January than economists forecast. The Labor Department will issue its employment data tomorrow. “People are thinking that Friday’s payroll report may be stronger than expected,” said Charles Comiskey, head of Treasury trading at Bank of Nova Scotia in New York. The Labor Department will say U.S. payrolls increased by 140,000 last month, after a 103,000 gain in December, according to economists surveyed by Bloomberg. The data may also show the unemployment rate increased to 9.5 percent from 9.4 percent, based on the surveys. --With assistance from Joshua Zumbrun in Washington and Daniel Kruger and Susanne Walker in New York. Editors: Nicholas Reynolds, Rocky Swift To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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