Treasuries fell as stocks rose and a government report showed initial jobless claims unexpectedly declined last week, damping demand for safe assets before a $16 billion 30-year bond auction today. U.S. debt halted a three-day surge after the 10-year real yield, which accounts for inflation, dropped to negative 1.45 percent yesterday, approaching the lowest since 2008. The premium investors earn from 30-year bonds instead of two-year notes shrank to 3.33 percentage points yesterday, a level not seen in 10 months. “Treasuries are weaker today as stocks seem to be stabilizing and Treasury market is turning its eye to taking down the supply,” said Sean Murphy, a trader at Societe Generale in New York, one of the 20 primary dealers that trade with the Federal Reserve. “There is still a lot of uncertainty out there which should help the auction go well.” Yields on 10-year notes rose nine basis points, or 0.09 percentage point, to 2.19 percent at 10:18 a.m. in New York, according to Bloomberg Bond Trader prices. The 2.125 percent securities maturing in August 2021 traded at 99 13/32. The yield fell to a record low 2.0346 percent on Aug. 9. The figure translated into negative 1.57 percent after subtracting inflation, the lowest real yield since September 2008. Yield Moves Thirty-year yields rose six basis points to 3.58 percent, while two-year yields were at 0.17 percent. The Standard & Poor’s 500 Index rose 2.2 percent New York after tumbling as much as 1.8 percent in futures trading earlier. Treasuries surged this month, pushing 10-year yields down more than 50 basis points since the start of August, as the European sovereign debt crisis and a potential double-dip recession in the U.S. sent the Standard & Poor’s 500 Index down 13 percent. The 30-year bonds being sold today yielded 3.59 percent in pre-auction trading, compared with 4.198 percent at the previous sale of the securities on July 14. ‘Auction Setups’ “Most traders will be extremely cautious in their auction setups today, given the immense volatility in the marketplace,” Justin Lederer, an interest-rate strategist at the primary dealer Cantor Fitzgerald LP in New York, wrote in a research note to clients. “Today’s auction results will be a total crap shoot.” Investors bid for 2.8 times the amount of debt offered last month, versus an average of 2.64 for the past 10 sales. Indirect bidders, the investor group that includes foreign central banks, bought 37.8 percent of the securities, compared with the 10- auction average of 39.8 percent. A $24 billion 10-year auction yesterday drew higher-than- average demand and a record low yield of 2.14 percent in the first offering of the maturity following Standard & Poor’s decision to cut the U.S. longer-term credit rating on Aug. 5. The bid-to-cover ratio, a gauge of demand that compares total bids with the amount of securities offered, was 3.22. The average for the prior 10 sales was 3.11. Jobless Claims Claims for unemployment insurance payments in the U.S. unexpectedly fell last week to a four-month low, signaling the recent slowdown in payroll gains is due to a lack of hiring rather than more firings. Applications for jobless benefits decreased 7,000 in the week ended Aug. 6 to 395,000, the fewest since early April, the Labor Department said today in Washington. Economists forecast 405,000 claims, according to the median estimate in a Bloomberg News survey. The number of people on unemployment benefit rolls and those getting extended payments also dropped. “The initial jobless claims numbers, while improving, is still hovering around 400,000,” said Ian Lyngen, a government bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “It’s a bit more bullish for Treasuries. We are not entirely clear we won’t see a concession ahead of the issue or at the auction.” The U.S. trade deficit unexpectedly increased in June to the highest level since October 2008 as a slump in exports exceeded a decline in shipments from overseas. The gap widened 4.4 percent to $53.1 billion from $50.8 billion in the prior month, Commerce Department figures showed today in Washington. The deficit exceeded all estimates in a Bloomberg News survey of economists in which the median was $48 billion. Exports declined the most since January 2009. To contact the reporter on this story: Cordell Eddings in New York at ceddings@bloomberg.net; Susanne Walker in New York at swalker33@bloomberg.net To contact the editor responsible for this story: Robert Burgess at bburgess@bloomberg.net

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