* Prices gain as consumer prices meet expectations
* Yields down on stock weakness, short-covering
By Steven Norton
NEW YORK, Jan 16 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
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.