By Wes Goodman and Candice Zachariahs Aug. 30 (Bloomberg) -- Treasuries advanced, recouping their losses from last week, after the Bank of Japan said uncertainty about the American economy is growing and Morgan Stanley cut its forecast for U.S. gross domestic product. U.S. government securities headed for a fifth monthly gain as the BOJ expanded a bank-loan program, highlighting concern the global expansion is slowing. Morgan Stanley revised its forecast for second-half growth to a range of 2 percent to 2.5 percent, from an earlier estimate of 3 percent to 3.5 percent. “We expect to see yields fall further,” said Tomohisa Fujiki, a bond strategist at BNP Paribas Securities Japan Ltd. in Tokyo. “The economic picture is deteriorating.” BNP’s U.S. arm is one of the 18 primary dealers that are required to bid at the government’s debt sales. The 10-year yield fell three basis points to 2.62 percent as of 2:41 p.m. in Tokyo, according to BGCantor Market Data. The 2.625 percent security maturing in August 2020 rose 7/32, or $2.19 per $1,000 face amount, to 100 1/32. The move undid last week’s three-basis-point yield increase. The BOJ will increase the amount it makes available for loans to banks by 10 trillion yen ($116 billion) to a total of 30 trillion, it said in a statement after an emergency meeting in Tokyo. “Uncertainty about the future, especially for the U.S. economy, has heightened more than before,” the central bank said. U.S. gross domestic product is expanding at a slower pace amid weaker global growth, domestic policy uncertainty and a lessening of economic stimulus, Morgan Stanley said in an e- mailed note to clients. Hiring, Manufacturing Reports this week will show hiring and manufacturing cooled in August, Bloomberg surveys of economists show. Trading is scheduled to close at 3 p.m. Tokyo time and stay shut in the U.K. for the Summer Bank Holiday, according to the Securities Industry and Financial Markets Association. U.S. trading is scheduled to take place as usual, according to the association’s website. Treasuries have returned 1.2 percent in August, which would be a fifth monthly gain, according to Bank of America Merrill Lynch indexes. That would be the longest winning streak since the period ended March 2008, when rising credit-market losses set the economy on course for a recession. An index of sovereign bonds around the world gained 1.4 percent this month, according to Bank of America. The Fed is scheduled to buy Treasury Inflation Protected Securities today as part of the plan to keep borrowing costs low with a focus on TIPS maturing from January 2011 to February 2040, according to its website. Bond Purchases Ajay Rajadhyaksha and Dean Maki, New York-based analysts at Barclays Capital Inc. forecast the central bank will purchase around $1 billion in TIPS across the curve, according to an e- mailed note dated Aug. 27. Fed Chairman Ben S. Bernanke said last week at a conference in Wyoming that the central bank will provide additional economic stimulus as needed, prompting traders to trim bets for the Fed to bolster its government bond purchases, the so-called quantitative easing policy makers are using to spur the economy. Ten-year yields will probably end the year at 3 percent as the U.S. economy recovers slowly, said Peter Jolly, the Sydney- based head of market research for the investment-banking unit of National Australia Bank Ltd., the nation’s largest lender. “Yields will be higher by year-end,” said Peter Jolly, the Sydney-based head of market research for the investment- banking unit of National Australia Bank Ltd., the nation’s largest lender. “The recovery continues, albeit it’s weak, and they may not need to do more quantitative easing.” Household purchases increased 0.3 percent in July from June, economists forecast before the Commerce Department issues the report today. Incomes also increased 0.3 percent, according to a separate Bloomberg survey. Income and purchases were both unchanged in June. Treasuries ‘Expensive’ Treasuries are “expensive” at current levels, said Brad Gibson, who helps manage about $12 billion as head of rates strategies at ING Investment Management in Sydney. “We have an underweight position to the U.S. Treasury market,” he said. “We wouldn’t be advising our clients to go invest in those securities.” Investors in a weekly survey by Ried Thunberg ICAP, a unit of ICAP Plc, the world’s largest inter-dealer broker, became less bearish on U.S. debt, the company said. Ried’s index on the outlook for Treasuries through September reached a new year-to-date high of 48, while prospects for U.S. debt through December gained one point to 43 for the week ending Aug. 26. A figure less than 50 shows investors expect prices to fall. To contact the reporters on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net. Candice Zachariahs in Sydney at czachariahs2@bloomberg.net.

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