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Treasuries Advance Before U.S. Reports Data on March CPI
 By Wes Goodman - Apr 12, 2012 9:21 PM GMT-0700

Treasuries gained for the first time in three days before U.S. data today that economists said will show the cost of living rose at a slower pace in March.

Federal Reserve Chairman Ben S. Bernanke, Vice Chairman Janet Yellen and New York Fed President William C. Dudley have all signaled easing may be needed in the U.S. if growth slows. The Fed bought $2.3 trillion of bonds from 2008 to 2011 in two rounds of so-called quantitative easing known as QE1 and QE2. Bonds also gained as data showed China’s economic growth slowed.

“The rally has further to go,” said Hiromasa Nakamura, a Treasury investor at Mizuho Asset Management Co. in Tokyo, which has the equivalent of $40.7 billion in assets. “They will have to do QE3 due to the fragile economic situation.”

Benchmark 10-year yields declined three basis points, or 0.03 percentage point, to 2.03 percent as of 2:06 p.m. in Tokyo, according to Bloomberg Bond Trader prices. The 2 percent security due in February 2022 rose 7/32, or $2.19 per $1,000 face amount, to 99 25/32.

Japan’s 10-year rate was little changed at 0.94 percent.

China’s gross domestic product rose 8.1 percent in the first quarter from 12 months earlier, the least in almost three years, the National Bureau of Statistics said. The median estimate in a Bloomberg News survey was growth of 8.4 percent.
Fed Comments

The Fed’s Dudley, in a speech yesterday to business leaders in Syracuse, New York, said “it is still too soon to conclude that we are out of the woods.”

It’s “far too early to declare victory,” Bernanke said in a March 27 interview with ABC News.

“Considerable uncertainty surrounds the outlook,” Yellen said April 11 in New York.

U.S. consumer prices rose 0.3 percent in March, after advancing 0.4 percent in February, according to the median forecast in a Bloomberg News survey of economists before the Labor Department reports the figure.

Consumer prices rose 2.9 percent in February from the year before, meaning 10-year notes yield negative 87 basis points after subtracting costs in the economy. The so-called real yield has been negative for almost a year. Today’s report may show annual consumer price gains slowed to 2.7 percent, according to the Bloomberg surveys.

Consumer confidence matched a 14-month high, a separate report today will show, based on the responses from economists.

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, was 2.3 percentage points. The average over the past decade is 2.14 percentage points.

Thirty-year Treasuries, among the most sensitive to inflation because of their long maturity, returned 2.7 percent this month as of yesterday, according to Bank of America Merrill Lynch indexes. The broad market returned 0.9 percent, the figures show.

To contact the reporter on this story: Wes Goodman in Singapore at