The combination of the lowest U.S. inflation rate in four decades and continuing concerns that the global recovery will falter is boosting bonds even as yields on 10-year notes fall below 3 percent, the lowest since April 2009. The surge in demand through so-called direct and indirect bids is helping drive down rates for U.S. President Barack Obama as he grapples with a budget deficit that’s forecast to swell 14 percent to a record $1.6 trillion.
“The economic backdrop is favorable for Treasuries,” said Thomas Girard, who helps manage $115 billion in fixed income at New York Life Investment Management in New York. “There’s no fear of inflation. The bigger fear is deflation.”