The Treasury 10-year note yield was near the highest in more than a week as the International Monetary Fund raised its forecast for global growth this year, boosting equities and curbing demand for the safest assets. The two-year note yield climbed earlier to within three basis points of the most this month. The world economy will expand 4.6 percent in 2010, the most since 2007, the Washington- based fund said yesterday. The government plans to sell a record-tying $12 billion of new Treasury Inflation Protected Securities today and will also announce the sizes of auctions for next week, with investors speculating demand will wane after yields fell this month to the least in 2010. The MSCI World Index of shares rose 0.6 percent. “The IMF’s upgrade to its growth forecast helped improve risk sentiment,” said Marc Ostwald, a fixed-income strategist at Monument Securities Ltd. in London. “Focus will be on the TIPS auction and supply announcement. Near-term direction in Treasuries will be driven by gyrations in equity markets.” The 10-year note yield fell 1 basis point to 2.97 percent as of 10:55 a.m. in London, according to BGCantor Market Data. It earlier reached 2.99 percent, the highest since June 29. The 3.5 percent security maturing in May 2020 rose 3/32, or 94 cents per $1,000 face amount to 104 15/32. The rate climbed six basis points yesterday, or 0.06 percentage point, the most in almost a month. The yield dropped to 2.8793 percent on July 1, the lowest level since April 2009. The two-year note yield was little changed today at 0.62 percent, after reaching 0.63 percent earlier. Jobless Report A report from the Labor Department today will show applications for jobless benefits dropped to 460,000 in the week ended July 3, according to a Bloomberg survey. That’s down from 472,000 in the previous week. The difference between yields on 10-year notes and Treasury Inflation Protected Securities, or TIPS, a gauge of trader expectations for consumer prices, narrowed to 1.68 percentage points yesterday, the least since Oct. 5. The spread was 1.74 percentage points today. Michael Pond, the head of U.S. interest-rate strategy at Barclays Plc, said the U.S. may face challenges selling securities that offer insurance against inflation. “A significant concession is needed for the auction to go well,” Pond said in a note to clients dated July 2. The company is one of the 18 primary dealers that are required to bid at the government debt sales. The Fed’s preferred price measure, which excludes food and fuel, rose 1.3 percent in May from a year earlier. The figure was 1.2 percent in April, within 0.1 percentage point of the lowest level since 1963. TIPS Auctions The Treasury in May added more frequent auctions of TIPS to improve the liquidity of the securities, whose principal is adjusted to reflect changes in the consumer price index. The U.S. Treasury Department sold $8 billion of 2020 1.375 percent inflation-indexed notes on April 5 at a yield of 1.709 percent, with the number of bids 3.43 times the amount of bonds on offer. The U.S. will sell $35 billion in three-year notes, $21 billion in 10-year debt and $13 billion in 30-year bonds on three days starting July 12, according to the median forecast from 10 of the 18 primary dealers. TIPS have returned 3.4 percent this year, versus 5.8 percent for Treasuries that don’t offer inflation protection, according to indexes compiled by Bank of America Corp.’s Merrill Lynch unit. Investors snapped up Treasuries in the second quarter on speculation European efforts to cut government spending would slow the global economic expansion. Ten-year yields will climb to 3.56 percent by year-end, according to a Bloomberg survey with the most recent forecasts given the heaviest weightings. To contact the reporters on this story: Keith Jenkins in London at kjenkins3@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net.

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