By Paul Dobson and Wes Goodman May 21 (Bloomberg) -- Treasuries fell on speculation Europe’s finance ministers’ meeting today will help stem a rout in the region’s currency as German lawmakers vote on the nation’s share of a $1 trillion bailout. Ten-year notes led the decline, trimming yesterday’s biggest rally in 14 months, as Treasury Secretary Timothy F. Geithner scheduled a trip to Germany and the U.K. for next week to help restore confidence in financial markets. Demand for debt also waned after yields yesterday fell to the lowest this year. Notes are still headed for a weekly advance as concern the Greek debt crisis is spreading sent stocks down around the world. “We have this parliamentary vote on the rescue package in Germany and investors can be quite sure there will be an approval of the package, so there might be some more moderate relief,” said Kornelius Purps, a fixed-income strategist at UniCredit SpA in Munich. “We are already at extremely stressed levels but in general the AAA bond universe will remain well bid going forward.” The yield on the benchmark 10-year note rose four basis points to 3.25 percent as of 8:14 a.m. in London, according to data compiled by Bloomberg. The 3.5 percent security due May 2020 fell 10/32, or $3.13 per $1,000 face amount, to 102 3/32. Ten-year yields, a benchmark for consumer and company borrowing costs, declined 16 basis points yesterday and slid as low as 3.20 percent, a level not seen since Dec. 1. The euro rebounded from a four-year low set earlier in the week to trade 0.2 percent higher at $1.2509. The MSCI Asia Pacific Index fell 1.4 percent, sliding for a sixth day, following losses in U.S. and European stocks. ‘Chaos’ “It’s chaos,” said Rob da Silva, who helps oversee $222 billion globally as managing director of fixed income for Asia and the Pacific in Sydney at Principal Global Investors, a unit of part of Principal Financial Group Inc. in Des Moines, Iowa. “We’re seeing panic and confusion and concern.” Volatility in the Treasury market surged over the past week, Merrill Lynch & Co.’s Move index shows. The gauge rose to 110.9 yesterday, approaching this year’s high of 116.7 set May 6. The index measures price swings in Treasuries based on over- the-counter options maturing in two to 30 years. Geithner “will meet with European officials to discuss the economic situation in the region and the measures being taken to restore global confidence and financial stability,” the Treasury Department said yesterday in a statement. German Plan The vote in Germany will probably come hours before European finance chiefs meet for the fifth time in five weeks as they strive to forge a united response to the debt crisis. German Finance Minister Wolfgang Schaeuble is scheduled to present a plan to his euro-area counterparts to avoid a repeat of the fiscal crisis touched off by Greece’s budget deficit. The proposal includes calls for faster budget cuts and the option of an “orderly state insolvency” for euro countries. This week’s decline in 10-year yields narrowed the difference over two-year rates to as little as 2.52 percentage points, after it reached 2.49 percentage points earlier today, the least since November. Traders cut bets on inflation. The spread between rates on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices, was at 1.93 percentage points after shrinking to 1.85 percentage points yesterday, the least since October. U.S. CPI The U.S. consumer price index fell 0.1 percent in April from March, the first decline in more than a year, the Labor Department reported May 19. U.S. 30-year average fixed-mortgage rates dropped to 4.90 percent yesterday, the least since Dec. 1, according to Bankrate.com in North Palm Beach, Florida. Treasuries returned 1.97 percent this month and German bonds gained 2.15 percent, Bank of America Merrill Lynch indexes show, as investors sought the relative safety of these two markets. Japanese government securities were little changed. U.S. company bonds fell 0.7 percent, based on the indexes. The MSCI World Index of shares slumped 11.1 percent, according to data compiled by Bloomberg. Yields indicate banks have become less willing to lend because of the European crisis. The London interbank offered rate, which banks pay for three-month loans in dollars, rose to 0.48 percent yesterday, the highest level since July, according to the British Bankers’ Association. To contact the reporters on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net; Paul Dobson in London at pdobson2@bloomberg.net

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