Treasuries were poised for their best monthly returns since August as slowing economic growth and the Federal Reserve’s commitment to sustain monetary stimulus spurred demand for the safety of government debt. Two-year note yields headed for their biggest monthly drop since January 2010 before a report forecast by economists to show personal spending slowed in March. The Fed said this week it will finish $600 billion of debt purchases in June under the second round of quantitative easing as planned. “The idea that the Fed will keep QE going has helped the market,” said Roger Bridges, who oversees the equivalent of $17.5 billion in Sydney at Tyndall Investment Management Ltd., a unit of Nikko Asset Management Co. “The data hasn’t been that hot.” Tields on two-year notes were little changed at 0.62 percent at 8 a.m. in New York, according to Bloomberg Bond Trader prices. The 0.625 percent note maturing in April 2013 rose less than 1/32, or 31 cents per $1,000 face amount, to 100. The yields on two-year notes have dropped 21 basis points this month, the most since a decrease of 32 basis points in January 2010. Ten-year yields were little changed at 3.30 percent and have fallen 17 basis points in April in the first monthly decrease since sliding 44 basis points in August. Personal spending rose 0.5 percent in March after gaining 0.7 percent in the previous month, according to the median forecast of 69 economists in a Bloomberg News survey before the Commerce Department’s report today. Personal income and consumer confidence increased, other reports may show. U.S. Debt Returns Treasuries have returned 1 percent this month, the most since August, according to Bank of America Merrill Lynch indexes. An index of bonds around the world has gained 0.7 percent. The Standard & Poor’s 500 Index has returned 2.7 percent during the period. Gross domestic product rose at a 1.8 percent annual rate from January through March after a 3.1 percent pace in the fourth quarter of 2010, the Commerce Department reported yesterday. The median forecast in a Bloomberg News survey was for a 2 percent rate of expansion. Fed Chairman Ben S. Bernanke indicated during a press conference April 27 that he will maintain record monetary stimulus once large-scale bond purchases end in June, while the need to cap inflation means further easing is unlikely. Fed Debt Buying The central bank said in November that it would buy Treasuries through the middle of 2011 to pump money into the economy. The central bank plans to purchase $5 billion to $7 billion of debt maturing from October 2013 to March 2015 today under the plan. The likelihood policy makers will raise the target rate for overnight lending between banks at their March 2012 meeting decreased to 45 percent, from 50 percent a week ago, Fed funds futures showed. The Fed has held the benchmark at zero to 0.25 percent since December 2008. President Barack Obama has offered the outlines of a program to reduce the debt by $4 trillion over 12 years through a combination of spending cuts and tax increases. “Our deficits are too high,” Treasury Secretary Timothy F. Geithner said yesterday in Detroit. “They will not be solved by future economic growth, and left unaddressed they will hurt future economic growth.” To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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