Treasuries rose, snapping a three- day decline, before a government report tomorrow on U.S. gross domestic product and Federal Reserve Chairman Ben S. Bernanke’s speech to central bankers in Jackson Hole, Wyoming. Benchmark 10-year yields were 30 basis points away from a record low, reflecting demand for the safest securities as the economy slows. Speculation that Bernanke will discuss ways to maintain the expansion is growing as traders recall that the Fed chief used the summit a year ago to announce the central bank would “do all that it can” to spur growth. The Fed went on to implement a $600 billion debt-purchase plan in November. “If he does nothing, that will be a problem for bonds,” said Kazuaki Oh’e, a debt salesman in Tokyo at CIBC World Markets Japan Inc., a unit of Canada’s fifth-largest lender. “He may not announce a round of debt purchases, but he may use money from redemptions to buy longer-term bonds.” Ten-year yields fell four basis points to 2.27 percent as of 6:46 a.m. in London, according to Bloomberg Bond Trader prices. The 2.125 percent note maturing in August 2021 advanced 9/32, or $2.81 per $1,000 face amount, to 98 3/4. The record low was 1.97 percent set on Aug. 18. Japan’s 20-year yield rose 1.5 basis points to 1.84 percent. The Ministry of Finance set a 1.8 percent coupon at an auction of 1.1 trillion yen ($14.3 billion) in 20-year bonds today. The U.S. government is scheduled to sell $29 billion of seven-year notes today. Fed Options Commerce Department data will show the economy grew at a 1.1 percent annual pace in the second quarter, down from the 1.3 percent that the government estimated last month, according a Bloomberg News survey of economists. A Labor Department report today will show initial claims for jobless insurance were little changed last week at 405,000, a separate survey shows. Bernanke may outline three stimulus options, interest-rate strategists Jim Caron and Jonathan Marymor at Morgan Stanley wrote in a report yesterday. The Fed chief may discuss using the proceeds from the central bank’s maturing holdings of mortgage-backed securities and agency bonds to buy longer-term Treasuries, according to Morgan Stanley, one of the 20 primary dealers authorized to trade directly with the central bank. Bernanke may address selling some of the Fed’s shorter-term holdings in exchange for longer maturities, the report said. Policy makers may cut the interest paid to banks on excess reserves held at the Fed, according to the report. Some investors say Treasuries don’t offer value. Low Yields “Current yields aren’t attractive,” said Yoshiyuki Suzuki, Tokyo-based head of fixed income at Fukoku Mutual Life Insurance Co., which has the equivalent of $71.6 billion in assets. “Inflation has hit a bottom. The U.S. economy isn’t good, but it’s not so bad.” The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt has risen to 2.03 percentage points from this year’s low of 1.96 percentage points set Aug. 18. The five-year average is 2.06 percentage points. Treasuries fell yesterday, pushing 10-year yields to the highest level in a week, after data showed durable goods orders rose more than forecast in July. The U.S. seven-year notes being sold today yielded 1.62 percent in pre-auction trading, versus 2.28 percent at the previous sale of the securities on July 28. Investors bid for 2.63 times the amount offered last month, compared with an average of 2.82 for the past 10 auctions. Indirect bidders, the investor group that includes foreign central banks, purchased 39.6 percent of the securities, versus the 10-sale average of 46.6 percent. U.S. government securities have returned 2.49 percent this month, the most since December 2008, based on Bank of America Merrill Lynch data. Investors sought the security of debt while stocks tumbled, sending the MSCI All Country World Index of stocks down 11 percent since the end of July. To contact the reporters on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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