Treasuries Rise 8th Day, Longest Gain Since 2008 on Safety Bid

Treasury 10-year notes rose for an eighth day, the longest run of gains since December 2008, amid speculation Federal Reserve efforts will fail to revive the economy and Europe’s debt crisis will deepen.

Benchmark yields dropped to a two-week low after Fed Bank of Philadelphia President Charles Plosser said yesterday more bond purchases by the central bank probably won’t boost growth. Investors also sought safer assets after the President of Spain’s Catalan region called early elections and police clashed with protestors in Madrid, adding to concern Europe’s financial turmoil is worsening. U.S. notes were also boosted as gauges of U.S. inflation expectations fell over the past week.

“While we judge the valuation of Treasuries as being rich at these levels, yields are unlikely to rise much from here given inflation expectations remains subdued,” said Luca Jellinek, head of European interest-rate strategy at Credit Agricole Corporate and Investment Bank in London. “There is still concern about the U.S. economic outlook, especially on the employment front.”

The 10-year yield dropped two basis points, or 0.02 percentage point, to 1.65 percent at 10:01 a.m. London time, according to Bloomberg Bond Trader prices. The 1.625 percent note due in August 2022 rose 5/32, or $1.56 per $1,000 face amount, to 99 3/4. The yield dropped to 1.64 percent, the lowest level since Sept. 10.

Plosser said the Fed’s latest round of bond purchases, or quantitative easing, may jeopardize its credibility.

The Federal Open Market Committee said on Sept. 13 it will buy mortgage-backed securities at a pace of $40 billion per month until the labor market improves. Policy makers have turned to unconventional tools to tackle unemployment that has stayed above 8 percent since February 2009.

Treasuries returned 0.4 percent since the end of June, according to Bank of America Merrill Lynch indexes. German debt gained 0.5 percent, and Japanese government bonds rose 0.4 percent, the data show.