Treasuries rose, heading for a second weekly advance, as investors sought the perceived safety of government debt amid concern the global recovery is slowing. Ten-year yields fell toward a four-week low on speculation Group of 20 leaders meeting this weekend will agree on proposals to tighten regulations for the financial sector, threatening bank profits. Reports next week will probably show economic and consumer confidence in Europe and the U.S. is waning, according to Bloomberg surveys. That may encourage the Federal Reserve to keep interest rates near zero to safeguard the recovery. “Market sentiment is still fragile and risk aversion is driving bond markets,” said Luca Cazzulani, senior fixed-income strategist at UniCredit SpA in Milan, Italy’s biggest bank. “In the short term, we remain bond positive.” The yield on the benchmark 10-year note fell two basis points to 3.12 percent as of 9:11 a.m. in London, according to BGCantor Market Data. The 3.5 percent security due May 2020 gained 5/32, or $1.56 per $1,000 face amount, to 103 6/32. The yield, which has dropped almost 10 basis points this week, touched 3.06 percent yesterday, the lowest since May 25. The two-year yield fell three basis points to 0.66 percent, after dropping yesterday to 0.63 percent, the least since November. G-20 Meeting G-20 leaders meeting in Toronto on June 26-27 will discuss policies aimed at addressing the European debt crisis, spurring global growth and overhauling regulation of the financial system. The meeting is also expected to discuss proposals for a global bank levy and a tax on securities transactions to clamp down on financial speculation. “Fiscal prospects are not going to change much, if at all,” Ciaran O’Hagan, a fixed-income strategist at Societe Generale SA in Paris, wrote in a client note today. “So we can look forward to the prospect of yet further turbulence, inspired by more sovereign indebtedness.” Treasuries also rose as credit-default swaps showed the cost of insuring against losses on European corporate bonds increased. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings climbed 6 basis points to 562.5, according to JPMorgan Chase & Co. prices at 7:30 a.m. in London. Credit-default swaps on Greece rose 13 basis points to a record 1,140 basis points, according to CMA DataVision. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. An increase signals deterioration in perceptions of credit quality. ‘Economic Problem’ Investor Jim Rogers, chairman of Rogers Holdings, said the world is in a bear market for financial assets. “The world has an on-going economic problem, which has not been resolved yet,” he said today in an interview on Bloomberg UTV in India. Treasuries were boosted this week as the Fed kept its benchmark rate in a record low range of zero to 0.25 percent on June 23 and reiterated its commitment to keep borrowing costs lows for an “extended period.” “Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad,” policy makers said in their statement. An index of executive and consumer sentiment in the 16 euro nations slipped to 98.3 this month from 98.4 in May, according to a Bloomberg survey. The U.S. Conference Board’s consumer confidence index declined to 62.5 in June from 63.3 the prior month, a separate survey showed. Both reports are due June 29. Rate Bets Traders cut bets the Fed will raise rates this year, with futures on the CME Group Inc. exchange showing a 21 percent likelihood of an increase by the December meeting, down from 30 percent odds a month earlier. The difference in yield between five-year Treasuries and similar-maturity Treasury Inflation Protected Securities indicates investors anticipate an annual inflation rate of 1.59 percent over the term of the securities, down from 1.95 percent at the end of last year. Demand increased as the Treasury sold a combined $108 billion of two-, five- and seven-year notes this week. Investors submitted bids for 3.01 times the amount of seven-year debt on offer yesterday, the highest bid-to-cover ratio since the notes were reintroduced in February 2009. The securities were sold at a yield of 2.575 percent, compared with the average forecast of 2.586 percent in a Bloomberg survey. The $40 billion in two-year notes sold on June 22 produced a record low yield of 0.738 percent. U.S. securities are poised for their best first half in a decade. Treasuries have returned 5 percent since Dec. 31, the largest gain in the first six months of a year since 2000, according to indexes compiled by Bank of America Corp.’s Merrill Lynch unit.

Source