Treasurys Rise on CPI, Bear Bailout

Bear Stearns Friday revealed it will tap JPMorgan Chase & Co. for a four-week secured loan facility to boost the company's liquidity. JPMorgan will make the loan in conjunction with the New York Federal Reserve.

Throughout this week, investors have been concerned about the investment bank's possible explosure to collapsing fund Carlyle Capital and other at-risk investment funds. Carlyle Capital, an arm of private equity firm Carlyle Group, invested heavily in poor-quality mortgage assets and has had to default on $16.6 billion in debt.

The market was concerned that Bear could end up seizing low-quality mortgage-backed securities as collateral from Carlyle. That likely would have left Bear unable to sell those assets. Bear Stearns already had taken significant writedowns on its own mortgage-related holdings.

Friday's news of emergency funding for Bear was viewed as an admission that the market's fears about declining liquidity were well-placed. This caused investors leery of further risk in the financial markets to push stock prices lower and once more place their bets on the safety of government-backed bonds.

The benchmark 10-year Treasury note rose 1 2/32 to 100 24/32 with a yield of 3.41 percent, down from 3.53 percent late Thursday, according to BGCantor Market Data. Prices and yields move in opposite directions.

The 30-year long bond advanced 22/32 to 100 20/32 with a yield of 4.34 percent, down from 4.45 percent late Thursday.

The 2-year note increased 27/32 to 100 15/32 with a 1.46 percent yield, down from 1.62 percent.

The bond market, which abhors inflation, also cheered news that consumer prices were tamer than expected in February. The Labor Department said consumer prices were unchanged last month, a better performance than the expected 0.3 percent gain. Core inflation, which excludes energy and food, also held steady in February after a worrisome 0.3 percent jump in January.

The more moderate February readings were the result of a quirky decline in energy costs that is likely to prove short-lived. Still, the news gives the U.S. Federal Reserve the green light to cut rates once more at its monetary policy meeting next Tuesday because the central bank will not have to worry so much about near-term inflation. If inflation rises too much, the central bank is under pressure to keep rates higher.

The Fed has cut the overnight fed funds rate from 5.25 percent before the current credit crisis to its present level of 3 percent. Bond market investors are expected another reduction of about 0.50 percentage point next week.

Other data showed the weakening economy taking a toll on consumers. Sentiment this month slipped to a 16-year low, according to a University of Michigan/Reuters survey. The consumer sentiment index dropped to 70.5 in March from 70.8 in February.