By Paul Dobson and Wes Goodman June 3 (Bloomberg) -- U.S. Treasuries fell for a second day as stocks rose around the world and investors speculated that reports today and tomorrow will add to evidence the U.S. recovery is taking hold, damping demand for government bonds. The drop pushed the yield on the 10-year note to the highest level in two weeks as the MSCI World Index of shares climbed 1.3 percent. A report from ADP Employer Services today will show businesses added 70,000 jobs in May, the most since December 2007, according to a Bloomberg survey. Figures from the Labor Department tomorrow will show the U.S. added the most jobs since 1983, a separate survey showed. “Going into the payrolls report, the bias is probably to the downside,” said Sean Maloney, a fixed-income strategist at Nomura International Plc in London. “The data that we’ve been having aren’t suggesting in any way that the economy is about to fall off a cliff, although sentiment is very fickle right now.” The 10-year note yield climbed four basis points to 3.38 percent as of 9:59 a.m. in London, according to BGCantor Market Data, the highest level since May 19. The 3.5 percent security due in May 2020 fell 11/32, or $3.44 per $1,000 face amount, to 101 31/32. Treasuries returned 1.7 percent last month, the most since March 2009, according to Bank of America Merrill Lynch indexes, amid speculation the European debt crisis may slow global growth and inflation. The MSCI World Index fell almost 10 percent. Initial Claims The Labor Department in Washington will report today that initial claims for jobless benefits fell for a second week, to 455,000, according to the median estimate of 42 analysts surveyed by Bloomberg. It will say tomorrow that payrolls climbed by 515,000 in May, according to the median projection in a separate survey. General Electric Co., the world’s largest maker of jet engines, is among companies hiring, increasing the number of jobs it planned to add in Michigan to more than 1,300 last month. Treasuries fell yesterday as pending U.S. home resales increased in April more than economists forecast and stocks advanced. “We’ve had a pretty good rally in the last few weeks due to global concerns,” said Jay Mueller, who manages about $3 billion of bonds at Wells Fargo & Co. in Milwaukee. “As some of the air of fear starts to abate, some reversal from the fear trade is occurring.” Inflation expectations are reviving, with the difference between yields on 10-year notes and Treasury Inflation Protected Securities widening today by 1 basis point to 205 basis points, or 2.05 percentage points. The difference, the so-called breakeven rate, was 1.83 percentage points on May 21, the lowest since October. Scaling Back Debt Treasuries have risen the past two months as the government scales back borrowing to finance annual budget deficits exceeding $1 trillion. Nine of the 18 primary dealers required to bid at U.S. auctions estimate the Treasury will sell $37 billion in three- year debt, $20 billion in 10-year notes and $13 billion in 30- year bonds over three days beginning June 8. The $70 billion total would be down from $78 billion in the week of May 10. Bond dealers expect the 2010 budget deficit to be smaller than the official $1.6 trillion White House forecast, and the Treasury indicated that tax revenue is increasing as the economy recovers from a recession. To contact the reporters on this story: Paul Dobson in London at pdobson2@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net

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