By Keith Jenkins and Yasuhiko Seki June 14 (Bloomberg) -- Treasuries fell, adding to last week’s decline, as signs the global economy is recovering boosted equities and eroded demand for the safety of U.S. government securities. The 10-year note dropped before reports this week that economists said will show manufacturing in the New York region grew and U.S. industrial production rose. The euro strengthened after Greek Finance Minister George Papaconstantinou told a newspaper his nation isn’t considering restructuring its debt. European industrial production increased more than economists forecast in April. The MSCI World Index of shares rose for a fifth straight day. “Treasuries are heading lower as risk appetite improves,” said Orlando Green, an interest-rate strategist at Credit Agricole Corporate & Investment Bank in London. “Equities are rising and that’s weighing on Treasuries.” The yield on the benchmark 10-year note rose six basis points to 3.30 percent at 8:19 a.m. in New York, according to BGCantor Market Data. The 3.5 percent security due in May 2020 dropped 1/2, or $5 per $1,000 face amount, to 101 23/32. The Federal Reserve Bank of New York’s general economic index rose to 20.0 in June from 19.11 in the previous month, according to a Bloomberg News survey ahead of the release of the data tomorrow. Production at factories, mines and utilities increased 0.9 percent in May, according to a separate survey before Fed releases figures on June 16. European Output Output in the euro-region economy rose 0.8 percent from March, the European Union’s statistics office in Luxembourg said today. Economists had projected a gain of 0.5 percent. From the year-earlier month, April production jumped 9.5 percent, the biggest gain since the data were first compiled in 1991. The German 10-year bund yield, the euro-area’s benchmark security, climbed six basis points to 2.63 percent. Europe’s sovereign-debt crisis shouldn’t postpone the Federal Reserve from raising interest rates, Federal Reserve Bank of St. Louis President James Bullard said at a press briefing in Tokyo today. The U.S. central bank lowered its Fed Funds target rate to a range of zero to 0.25 percent in December 2008 to reduce borrowing costs and help stimulate the economy. Market turmoil stemming from Europe’s fiscal woe has increased demand for the relative safety of U.S. government bonds, driving yields on Treasuries lower, and that’s had a stimulative effect on the U.S. economy, Bullard said. At the same time, Bullard said now’s not the time to normalize the premium of the discount rate, the Fed’s charge for direct loans to banks, over the benchmark overnight lending rate target. Rate Stimulus Bullard’s comments contrast with Chicago Fed President Charles Evans and Atlanta Fed President Dennis Lockhart, who have in recent weeks said the European turmoil may slow any U.S. withdrawal of interest-rate stimulus. Federal Reserve Bank of Philadelphia President Charles Plosser said on June 11 the U.S. economic recovery is broadening and that the central bank could begin to sell assets from its balance sheet “sooner rather than later.” “The economic recovery is on a sustainable path, and I expect further progress even as we unwind the accommodative monetary and fiscal stimulus put in place during the crisis,” Plosser said in Altoona, Pennsylvania. “Although the recovery so far has been quite mild given the recession’s severity, I believe that it is becoming more broad-based.” ‘Real Ignorance’ While monitoring the recovery’s pace, Fed policy makers are debating when and how to sell $1.1 trillion of the assets that the central bank purchased through March in an effort to lower home-loan costs. Plosser reiterated that he favors an exit from record monetary stimulus through timely sales of mortgage-backed securities in the Fed’s portfolio. Policy makers have kept the target in a range of zero to 0.25 percent since December 2008. Papaconstantinou said the receipt of 110 billion euros ($134 billion) in emergency loans is enough to cover most of Greece’s borrowing needs in the coming years and means the nation will be able to meet its obligations, according to an interview with Real News. Talk of Greece leaving the euro is based on speculation and “real ignorance of how the European Union and institutions work,” he said, according to the newspaper report. Treasuries have returned 4.4 percent since the start of this year, according to indexes from Bank of America Corp.’s Merrill Lynch unit. German bunds have returned 7 percent, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. To contact the reporters on this story: Keith Jenkins in London at kjenkins3@bloomberg.net; Yasuhiko Seki in Tokyo at yseki5@bloomberg.net

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