Treasuries declined, pushing 10-year yields to the highest level in four months, as signs the global recovery is strengthening boosted stocks and damped demand for the safest securities. Two-year yields also rose on speculation the European Central Bank will take extra steps to curb contagion from Europe’s sovereign-debt crisis, encouraging demand for riskier assets. The Labor Department may say tomorrow that U.S. payrolls expanded for a second month, after reports yesterday indicated job growth and manufacturing expanded in the world’s largest economy. The MSCI World Index added 0.7 percent. “It appears to be a risk-on day today, partly because of speculation that the ECB will do more to stop the debt crisis from spreading,” said Peter Chatwell, a fixed-income strategist at Credit Agricole CIB. “That helps to reduce demand for safe- haven assets such as Treasuries, at least for now.” Benchmark 10-year yields rose two basis points to 2.99 percent at 10:17 a.m. in London, according to BGCantor Market Data. The 2.625 percent security maturing in November 2020 fell 5/32, or $1.56 per $1,000 face amount, to 96 27/32. The rate increased 17 basis points yesterday, the most since Nov. 15, according to data compiled by Bloomberg. The yield rose as high as 2.98 percent, the most since July 30. Further declines may be limited as the Federal Reserve plans to buy $7 billion to $9 billion of Treasuries today, and the government is scheduled to announce the sizes of three auctions set for next week. ECB Meeting ECB policy makers meeting in Frankfurt today will keep the benchmark interest rate at a record low of 1 percent, according to all 52 economists in a Bloomberg survey. That decision is due at 1:45 p.m. local time and a press conference takes place 45 minutes later. ECB President Jean-Claude Trichet said this week that investors are underestimating policy makers’ determination to halt the debt crisis and shore up the euro. The Fed is scheduled to buy Treasuries due from 2018 to 2020 today as part of its plan to pump $600 billion into the economy through June, according to its website. Next week’s sales will consist of $32 billion in three-year notes on Dec. 7, $21 billion of 10-year securities the following day and $13 billion of 30-year bonds on Dec. 9, according to Wrightson ICAP LLC, an economic advisory company in Jersey City, New Jersey, that specializes in government finance. The $66 billion total would compare to $72 billion at the previous sale of the same maturities in November. Treasuries tumbled yesterday as stocks rose and a report showed the U.S. added more jobs in November than economists forecast. Spreads Widen “We are seeing clear evidence that monetary stimulus is having an impact and should reaccelerate the world economy,” JPMorgan Chase & Co. strategists including Jan Loeys wrote in a note received today. “Our main position is being outright long equities and commodities, followed by overweight them and credit versus government debt.” The difference between two- and 10-year Treasury yields widened to 2.46 percentage points yesterday, the most since July. The spread is at 2.43 percentage points today. Two-year rates tend to track the Fed’s target for overnight lending because of their shorter maturity. Yields on longer-term bonds are more influenced by inflation and by the size of the government’s debt. The Fed has pledged to keep its target for overnight bank lending low for an “extended period.” The difference between yields on 10-year notes and those on Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the securities, has widened to 2.16 percentage points from this year’s low of 1.47 percentage points in August. To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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