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Treasuries Rise For a Third Day As Investors Expect the Fed to Continue QE Infinity

“Treasuries advanced for a third day before the Federal Reserve starts a two-day meeting today amid speculation policy makers will decide to keep buying bonds to support economic growth.

Benchmark 10-year yields approached the lowest level in almost two weeks as Cyprus’s Defence Minister Fotis Fotiou said parliament may not vote today on a tax on bank depositsneeded to secure financial aid, fueling concern the region’s debt crisis will worsen. Fed Chairman Ben S. Bernanke said this month “premature” interest-rate increases would stifle the economy.

“Bernanke is leading the charge and continues to water down any hawkish talk,” said Barra Sheridan, a rates trader at Bank of Montreal in London. “U.S. data has been uniformly strong but the risk looking forward is that it takes a downturn. If that’s the case, yields could dip towards 1.80 percent.”

The 10-year yield dropped two basis points, or 0.02 percentage point, to 1.93 percent at 7:01 a.m. in New York, according to Bloomberg Bond Trader prices. The 2 percent note due February 2023 rose 7/32, or $2.19 per $1,000 face amount, to 100 5/8. The yield fell to 1.90 percent yesterday, the lowest since March 6.

The Fed will issue a statement and economic projections after concluding its two-day policy meeting tomorrow, and Bernanke will brief reporters.

“Premature rate increases would carry a high risk of short-circuiting the recovery, possibly leading — ironically enough — to an even longer period of low long-term rates,” Bernanke said in a speech in San Francisco on March 1.

Fed Buying…”

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