Treasuries rose, extending a monthly gain, as Europe’s debt crisis underpinned demand for the safest securities and investors awaited the results of central-bank policy meetings in the U.S. and euro area this week. Benchmark 10-year notes gained for a second day as the Federal Reserve starts a two-day meeting in Washington. While the Federal Open Market Committee probably won’t start new asset purchases, it may keep a pledge to hold the main interest rate near zero through late 2014, economists predict. Treasuries rallied with German bunds in July as economic reports added to signs Europe’s fiscal woes are harming the real economy. “There’s been speculation that the FOMC will act further to stimulate growth, and that perhaps underpins Treasuries,� said Charles Diebel, head of market strategy at Lloyds Banking Group Plc in London. “They might not do it, but given a lot of uncertainty out there, the market is not willing to go short Treasuries into the event.� A short position is bet an asset will decline. The U.S. 10-year yield fell two basis points, or 0.02 percentage point, to 1.48 percent at 7:32 a.m. in New York, according to Bloomberg Bond Trader prices. The 1.75 percent security due in May 2022 advanced 6/32 or $1.88 per $1,000 face amount, to 102 14/32. The yield has declined 17 basis points this month and fell to a record 1.379 percent on July 25. U.S. government securities, perceived to be among the world’s safest and most liquid assets, returned 1 percent in July as of yesterday, according to indexes compiled by Bank of America Merrill Lynch. Their German counterparts rose 1.4 percent, while Spanish debt lost 0.5 percent. Personal Income Treasuries rallied today even as economists predicted government reports will show personal income and household spending both increased in June, weakening the Fed’s case for adding more stimulus. Consumer purchases rose 0.1 percent, after being unchanged in May, according to economists surveyed before today’s Commerce-Department report. Personal incomes increased 0.4 percent, accelerating from a 0.2 percent gain the previous month, a separate Bloomberg survey showed. U.S. policy makers will refrain from starting new bond purchases, according to 88 percent of economists surveyed by Bloomberg. Forty-eight percent say the FOMC will announce the buying at its Sept. 12-13 meeting, according to the July 25-27 survey of 58 economists. Skepticism Correct “It’s right to be skeptical about whether anything will be delivered at all, the one thing it certainly won’t be is coordinated� with other central banks, said Marc Ostwald, a fixed-income strategist at Monument Securities Ltd. in London. “With yields where they are, what is the benefit of doing more quantitative easing?� he said, referring to asset purchases Fed Chairman Ben S. Bernanke said on July 17 that policy makers are “looking for ways to address the weakness in the economy should more action be needed.� The U.S. central bank said in January that its benchmark interest rate will stay at “exceptionally low levels� at least through late 2014, extending its pledge from the middle of 2013. The Conference Board’s index of consumer confidence fell in July for a fifth month, the longest stretch of declines since the first half of 2008, a separate Bloomberg survey showed. The gauge is estimated to have dropped to 61.5 from 62 in June. “We can’t expect a significant improvement in the U.S. economy, and that’s weighing on Treasury yields,� said Makoto Suzuki, a senior bond strategist at Okasan Securities Co. in Tokyo. “The Fed may extend its pledge to keep interest rates low for longer.� European Central Bank officials meet to review monetary policy in Frankfurt on Aug. 2. Fed Buying The Fed is today scheduled to buy as much as $5 billion of Treasuries maturing in July 2018 to May 2020. The purchases are part of its plan to swap short-term debt in its holdings for longer maturities. Government of Singapore Investment Corp., a manager of more than $100 billion, cut investments in bonds to 17 percent of its portfolio in the year ended March 31 from 22 percent a year earlier, according to its annual report. The sovereign wealth fund boosted cash holdings to 11 percent from 3 percent. “We reduced the allocation to bonds because bond yields in the developed markets had been pushed down to abnormally low levels by the flight to safe assets and central bank intervention,� Chief Investment Officer Ng Kok Song wrote in the report. To contact the reporters on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net; 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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