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By Bloomberg

A gauge of global bond yields approached a record low, reflecting the outlook for slowing inflation as oil prices tumbled and the dollar traded near a five-year high.

Bonds in the Bank of America Merrill Lynch Global Broad Market Sovereign Plus Index yielded 1.33 percent at the end of last week, the lowest level since 2013. The record was 1.29 percent set May 2, 2013, based on the data starting in 1996. Japanese and Australian bonds advanced today, pushing yields to the lowest levels this year.

“With the higher U.S. dollar and lower oil prices, we’re seeing a fall in inflation expectations, particularly in the U.S.,” said Roger Bridges, chief global strategist for interest rates and currencies at Nikko Asset Management Australia in Sydney. The bond rally “is likely to continue so long as the U.S. dollar keeps going up,” he said. The company manages the equivalent of $18.9 billion.

The benchmark U.S. 10-year yield was little changed at 2.08 percent at 7:01 a.m. in London, according to Bloomberg Bond Trader data. It has fallen from 3.03 percent at the end of 2013. The price of the 2.25 percent note maturing in November 2024 was at 101 1/2.

Japan’s 10-year yield dropped two basis points to 0.375 percent, the lowest since April 2013. Australia’s touched 2.82 percent, the least since July 2012.

Oil Tumbles

Falling oil prices reduce energy costs, while the surging dollar makes it cheaper for consumers in the U.S., the world’s biggest economy, to purchase goods from abroad.

Oil has slumped more than 20 percent since OPEC decided at a meeting last month to maintain its production target. The Bloomberg Dollar Spot Index posted its highest close since 2009 earlier this month.

Bonds in the Bank of America sovereign debt index have returned 7.9 percent this year, headed for their best performance since 2008.

The difference between yields on 10-year notes and similar- maturity Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices, shrank to 1.61 percentage points last week, the narrowest since 2010.

Globally, bond investors anticipate consumer prices will rise an average 1.09 percent a year, based on the Bank of America data.

Too Expensive

Treasuries snapped a five-day rally today in response to a gain in U.S. stock futures, said Kazuaki Oh’e, a debt salesman at CIBC World Markets Japan Inc. in Tokyo. Futures contracts on the Standard & Poor’s 500 index climbed 0.3 percent, curbing demand for the relative safety of debt.

U.S. government securities also became too expensive for some investors as 10-year yields fell toward 2 percent, he said.

Federal Reserve data on manufacturing today and the New York Fed’s report on regional manufacturing activity will both show gains, according to Bloomberg News surveys of economists. The Treasury is scheduled to report on foreign investment in U.S. securities for October.

Tumbling oil costs and a slowdown in global economic growth may lead the Fed to delay raising interest rates, said Kevin Chen, a bond trader at Capital Securities Corp. in Taipei. Chair Janet Yellen and her fellow policy makers are scheduled to meet tomorrow and the next day.

Below Target

The Fed’s preferred measure of prices, a gauge tied to personal consumption expenditures, has been below the central bank’s 2 percent target for more than two years, and a rate increase would tend to curtail economic activity and make it more difficult to meet the goal.

Policy makers will raise borrowing costs in about 8 1/2 months, based on data from Morgan Stanley.

“The States is doing really well but everybody else isn’t,” Chen said. “Will Janet Yellen raise the rate? It’s tough for her. In the first quarter, the 10-year yield will still be going down because of oil,” he said.

Paul Krugman, who won the Nobel Prize for economics in 2008, said policy makers are unlikely to raise interest rates in 2015.