TREASURIES-Prices gain as inflation steady, bunds rally
* Prices gain as consumer prices meet expectations * Yields down on stock weakness, short-covering By Steven Norton NEW YORK, Jan 16 (Reuters) - U.S. Treasuries prices gained on Thursday after inflation data came in as expected and amid strength in German government debt and overnight demand for safe-haven U.S debt. U.S. consumer prices rose by their most in six months in December but were in line with expectations, after producer price data on Wednesday surprised some investors by rising more than expected. That eased some inflation concerns, while an unexpected drop in Australian employment boosted demand for Treasuries overnight and as German bunds also rallied. "Global inflation is very tame and not problematic, and that's been a factor that's allowed yields to fall this year," said Kim Rupert, managing director for fixed income analysis at San Francisco-based Action Economics. "The data today was a bit overshadowed by earnings, and the weakness in stocks added to the rise in Treasury prices." Benchmark 10-year Treasuries were last up 11/32 in price to yield 2.845 percent, down from 2.884 percent late on Wednesday. Thirty-year bonds gained 18/32 in price to yield 3.774 percent, down from 3.806 percent. Treasuries extended gains after the Philadelphia Fed's index of business conditions in the U.S. Mid-Atlantic region fell to its lowest level since April. Data also showed the number of Americans filing new claims for unemployment benefits fell for a second week last week, suggesting a sharp slowing in job growth in December was likely to be temporary. The Fed bought $1.39 billion in bonds due 2036 and 2043 on Thursday as part of its ongoing bond purchase program. Outgoing Fed Chairman Ben Bernanke, in his last planned public remarks, said he believes the controversial steps he took to pull the economy out of the recession were effective. He said concerns about potential harm to financial stability were the only risk from unconventional monetary policies, but that should not deter the central bank from delivering accommodation the economy needs.
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