The sudden slowdown in U.S. inflation has left Treasuries at the cheapest levels in almost two years, aiding the Federal Reserve’s efforts to tamp down long-term borrowing costs while the economy improves.

Yields on 10-year notes, the benchmark measure for everything from home loans to corporate bonds, reached an 11- month high of 2.08 percent on March 8. The securities pay interest 0.88 percentage point higher than the personal consumption expenditures index deflator, the Fed’s favored inflation gauge, the widest gap since May 2011.

Growth in so-called real yields is what Fed Chairman Ben S. Bernanke needs to persuade bond investors that he has inflation under control, even after pumping more than $2.5 trillion into the economy to spur growth and bring down the jobless rate. Jeffrey Gundlach, whose $39.5 billion DoubleLine Total Return Bond Fund beat 97 percent of its peers last year in part by avoiding U.S. government debt, said on March 5 that “relative value has swung more to the favor” of Treasuries.

“The Federal Reserve and Ben Bernanke are not concerned about inflation right now, and neither is the bond market over the short term,” Donald Ellenberger, who oversees about $10 billion as co-head of government and mortgage-backed securities at Federated Investors in Pittsburgh, said in a telephone interview March 1.

The PCE gauge, which measures household spending, rose 1.2 percent in January from a year earlier, the smallest increase since October 2009 and down from a recent high of 2.9 percent in September 2011, the Commerce Department said March 1. The central bank has said it wants to keep inflation below 2 percent.

That may be easier because payroll taxes rose in January, and $85 billion in spending cuts went into effect after Congress was unable to reach a budget agreement last month. Incomes slumped 3.6 percent, the biggest monthly drop in 20 years, the Commerce Department reported March 1.

“With all of the uncertainty over policy and the economy, and with no inflation pressures to speak of, the market has found equilibrium,” Ellenberger said.

Yields on 10-year notes rose 20 basis points, or 0.20 percentage point, to 2.04 percent last week in New York trading, the biggest increase since the five days ended March 16, 2012, according to Bloomberg Bond Trader prices. The yield touched 2.08 percent, the highest since April 5, 2012, after falling for the previous two weeks and sinking 11 basis points in February. The 10-year notes yielded 2.05 percent at 9:04 a.m. in New York.

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