Treasuries rise on forecasts of Fed asset purchases

Treasuries rose Tuesday, led by 30-year bonds, amid forecasts the Federal Reserve will expand asset purchases to drive borrowing costs lower after this week's two-day policy meeting.

Economists surveyed by Bloomberg said they expected the U.S. central bank to announce plans to buy at least $500 billion of long-term securities. Polls showed Republicans may retake the U.S. House and narrow the Democrats' margin in the Senate in elections yesterday, reducing the likelihood of additional fiscal spending and limiting government borrowing.

Fed policy makers said after their last meeting on Sept. 21 they were prepared to act to support the recovery and increase the inflation rate, raising speculation they will add to their government bond purchases. That helped send the two-year note yield to an all-time low of 0.327 percent on Oct. 12.

U.S. policy makers will restart a program of securities purchases known as quantitative easing to spur growth, reduce unemployment and increase inflation, said 53 of 56 economists surveyed last week.

"Thirty-year notes hitting four percent has made the sector more valuable on a relative basis, sparking buying," said Larry Milstein, managing director in New York of government and agency debt trading at R.W. Pressprich & Co.

- Bloomberg News