TREASURIES-Take breather in Asia from Fed-sparked rally

HONG KONG, March 20 (Reuters) - U.S. Treasuries drifted in Asia on Friday, taking a breather from this week's surge after the Federal Reserve said it would start buying long-term bonds and stirred expectations for more purchases down the road.

* Activity was limited, with Japanese financial markets closed for the spring equinox holiday.

* Fed Chairman Ben Bernanke will speak on the financial crisis and community banking in Phoenix later in the day and is expected to take questions from the audience. [FED/DIARY]

* Ten-year notes US10YT=RR were flat in price to yield 2.608 percent, having slid 28 basis points this week -- what would be the biggest such drop in three months. Two-year notes US10YT=RR were also unchanged to yield 0.876 percent, down about 9 basis points on the week.

* The two-year/10-year yield curve was steady at 173 basis points, 20 basis points flatter on the week.

* The Fed dropped a bombshell on investors this week by saying it would buy $300 billion of Treasuries, on top of increasing purchases of mortgage-backed securities to $1.25 trillion and agency debt to $200 billion.

* But reflecting the inflationary worries sparked by the Fed's bold action, the two-year/30-year yield curve was at 276.5 basis points and hit its steepest levels since November this week.

* Ten-year TIPS US10YTIP=TWEB jumped to price in a break-even inflation rate of 131 basis points versus 103 basis points a week ago.

* Ten-year swap spreads USD10YTS=RR were at 30.5 basis points, having widened about 10 basis points since the Fed announcement as the expected buying reduced some of the supply premium in cash yields compared with swap rates.

* U.S. stock futures pointed to a dip at the opening bell. S&P 500 futures SPc1 were down about 1 percent in Asia. But in the past two weeks, the S&P .SPX has surged nearly 15 percent -- what would be its best two-week run since 1974. (Reporting by Eric Burroughs; Editing by Kazunori Takada)