Treasury 10-year notes fell before the publication of reports forecast to show economic growth quickened and consumer confidence improved. The drop pared a weekly advance as stocks in Europe rose for the first time in six days amid easing concern an uprising in Libya would trigger a surge in crude oil prices sufficient to slow global growth. The U.S., Saudi Arabia and the International Energy Agency said yesterday they can compensate for any disruption to crude supplies caused by turmoil in Africa’s third-largest oil producer. “The Middle East situation is just temporary,” said Philip Marey, a senior market economist at Rabobank Groep in Utrecht, Netherlands. “The long-term trend is for higher yields because the recovery is strengthening and inflation concerns are rising.” The yield on the 10-year Treasury was one basis point higher at 3.46 percent as of 6:33 a.m. in New York, according to BGCantor Market Data. The 3.625 percent note maturing in February 2021 fell 3/32, or 94 U.S. cents per $1,000 face amount, to 101 11/32. The rate slid to 3.41 percent yesterday, the lowest since Feb. 2, and has fallen from a 10-month high of 3.77 percent on Feb. 9. The yield has gained nine basis points this month. The Stoxx Europe 600 Index of equities rose 0.8 percent, snapping a five-day slide. Crude oil futures for April delivery in New York traded at $97.77 a barrel, after rising to $103.41 yesterday, the highest level since September 2008. Confidence Index U.S. gross domestic product grew at a 3.3 percent annual rate in the fourth quarter, faster than the 3.2 percent pace the government estimated in January, according to a Bloomberg News survey before today’s Commerce Department report. The final reading of the Reuters/University of Michigan confidence index for February climbed to 75.4 from 74.2 in January, a separate survey showed. The preliminary data showed a gain to 75.1. Yields signal investors are betting inflation will quicken as the economy expands. The difference between rates on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, widened to 2.44 percentage points yesterday, the most since April. Five-year inflation swaps rose to 2.53 percent yesterday, the most since 2008. The securities allow investors to exchange fixed-interest rates for returns equivalent to the consumer price index. Sustain Expansion The Federal Reserve is scheduled to purchase $6 billion to $8 billion of government debt maturing from May 2018 to February 2021 today as part of its plan to sustain the expansion. Demand for the relative security of debt waned even as Libyan leader Muammar Qaddafi reinforced his defense of the capital, Tripoli, with tanks, while opponents consolidated control of the country’s oil-rich east. President Barack Obama said in a statement that a report from Algeria’s official news agency that the North African nation had ended a long-standing state of emergency was a “positive sign” the government is heeding the will of its people. Saudi Arabia’s King Abdullah will shuffle his cabinet today as he attempts to counter a growing pro-democracy movement, the London-based Times reported. “There’s a quite substantial risk and safe-haven premium in the fixed-income universe,” said Kornelius Purps, an interest-rate strategist at UniCredit SpA in Munich. “We are all uncertain about how this situation in Libya will evolve.” To contact the reporters on this story: Paul Dobson in London at pdobson2@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net. To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.

Source