By Wes Goodman April 15 (Bloomberg) -- Treasuries were poised to finish the first half of April with a loss as economists said a Federal Reserve report today will show industrial production accelerated in March. U.S. government securities slid into negative territory for the month yesterday, for a 0.9 percent decline since the end of February, indexes compiled by Bank of America Corp.’s Merrill Lynch unit show. Investors should sell Treasuries and the bonds of other Group of Seven nations because they are issuing too much debt, said Payden & Rygel, a Los Angeles-based money manager overseeing $50 billion, in a report. “Yields can go higher,” said Tomohisa Fujiki, an interest-rate strategist at BNP Paribas Securities Japan Ltd. in Tokyo. “There’s upward momentum in the economy. Things are a little brighter than we thought in December.” BNP’s U.S. unit is one of the 18 primary dealers that trade directly with the Federal Reserve. The 10-year note yielded 3.86 percent as of 6:39 a.m. in London, according to BGCantor Market Data. The 3.625 percent security due in February 2020 traded at a price of 98 1/8. Ten-year rates will rise to 4.13 percent by year-end, according to a Bloomberg survey of banks and securities companies, with the most recent forecasts given the heaviest weightings. Fujiki forecasts 4 percent in the coming months. Output at factories, mines and utilities climbed 0.7 percent after a 0.1 percent increase in February, according to the median forecast of 78 economists surveyed by Bloomberg News. Goldman Sachs Group Inc., the world’s most profitable investment bank, raised its estimate for U.S. second-quarter economic growth to 3 percent from 2 percent and dropped its forecast that the jobless rate would climb past 10 percent, it said in an e-mail. Trim G-7 Bonds Investors should “reduce exposure” to the bonds of G-7 nations as governments borrow to sustain their economies, Payden & Rygel said in a report yesterday. The G-7 consists of the U.S., Japan, France, Germany, Italy, Canada and the U.K. “There are long-term consequences to increasing the supply of government debt,” according to the report. President Barack Obama boosted the marketable U.S. debt to a record $7.76 trillion, Treasury Department figures show. Japan’s government debt totals 871.5 trillion yen ($9.3 trillion), according to the Ministry of Finance. Treasuries may attract investors as 10-year yields rise, said Kei Katayama, leader of the foreign fixed-income group at Daiwa SB Investments Ltd. in Tokyo. The company is a unit of Daiwa Securities Group Inc., Japan’s second-biggest investment bank after Nomura Holdings Inc., and it has the equivalent of $36.6 billion in assets. Yields ‘Attractive’ “Yields are attractive around 4 percent,” Katayama said. He is betting investors will favor longer maturities over shorter ones, narrowing the yield difference between the two. The spread between two- and 10-year rates widened to 2.81 percentage points from 2.75 percentage points a month ago. That’s down from a record 2.94 percentage points in February. Two-year rates tend to track the Fed’s target for overnight lending because of their shorter maturity. Yields on longer-term bonds are more influenced by inflation and by the size of the government’s debt. International demand for long-term U.S. notes, bonds and stocks probably rose in February, according to the median forecast in a Bloomberg News survey of economists before the Treasury Department reports the figure today. Net purchases climbed to $29.7 billion from $19.1 billion in January, the survey shows. Construction, Unemployment Treasuries declined yesterday as Federal Reserve Chairman Ben S. Bernanke said the U.S. expansion will remain moderate and a central-bank survey said the economy grew “somewhat” across most of the U.S. in March. Ten-year note yields rose from near the lowest level in three weeks as the Fed’s report said the economy improved in 11 of the central bank’s 12 districts, while consumer spending and manufacturing strengthened. Bernanke told Congress the economy still contends with weak construction spending and high unemployment. MSCI’s Asia Pacific Index of shares rose 0.6 percent, gaining for a second day and helping curb demand for the relative safety of government debt. The Standard & Poor’s 500 Index advanced 1.1 percent yesterday, the most in almost six weeks. Bank of Japan Governor Masaaki Shirakawa said today the global economy is recovering moderately. China’s economicgrowth accelerated to 11.9 percent in the first quarter, the fastest pace in almost three years, the statistics bureau said in Beijing. To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net.

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