Treasury 10-year yields approached a three-week low amid speculation a Federal Reserve survey of economic conditions to be released today will back the case for the central bank to expand its bond-purchase program. Benchmark notes held a two-day advance before Fed Chairman Ben S. Bernanke speaks at the end of this week at the Kansas City Fed’s annual economic symposium in Jackson Hole, Wyoming. Economists say an industry report today will show pending home sales rose last month, according to a Bloomberg News survey. “There are some expectations in the market for more Fed action and that underpins demand for Treasuries,� said Soeren Moerch, head of government bond trading at Danske Bank S/A in Copenhagen. “Further gains may be limited as speculation of improved housing market is weighing on the long end of the market,� he said, referring to longer-maturity bonds. The benchmark 10-year yield fell less than one basis point, or 0.01 percentage point, to 1.63 percent at 10:31 a.m. in London, according to Bloomberg Bond Trader prices. The 1.625 percent note due in August 2022 gained 1/32, or 31 cents per $1,000 face amount, to 99 30/32. Minutes of the Fed’s July 31-Aug. 1 meeting released last week showed many policy makers said additional stimulus probably will be needed soon unless the economy shows signs of a durable pickup. The Fed next meets on Sept. 12-13. The central bank will release its Beige Book survey of economic conditions today. Home Sales Pending home sales rose 1 percent in July, after falling 1.4 percent in June, according to a Bloomberg survey before the National Association of Realtors’ report. The U.S. economy grew at a 1.7 percent pace in the second quarter, more than the 1.5 percent rate the government estimated a month ago, another Bloomberg survey showed ahead of today’s data. The Fed is swapping shorter-term Treasuries in its holdings with those due in six to 30 years to put downward pressure on long-term interest rates. The central bank is scheduled to buy as much as $5 billion of Treasuries due from August 2018 to August 2020 today as part of the plan, according to the Fed Bank of New York’s website. Treasuries rose on the previous two days on speculation the Fed is planning to announce a new plan to buy bonds, known as QE3 because it would be the central bank’s third round of purchases under its so-called quantitative easing program. Policy makers use this method to support the economy by curbing borrowing costs. “The markets want the Fed to do QE3,� said Masaru Hamasaki, chief strategist in Tokyo at Toyota Asset Management Co., which oversees the equivalent of $24 billion. “That’s pushing yields lower.� Most Expensive Treasuries are the most expensive in three weeks, based on the term premium, a model created by economists at the Fed that includes expectations for interest rates, growth and inflation. The gauge declined to negative 0.89 percent today, the costliest since Aug. 6. A negative reading indicates investors are willing to accept yields below what’s considered fair value. The average over the past decade is positive 0.46 percent. The U.S. is scheduled to auction $35 billion of five-year debt today and $29 billion of seven-year securities tomorrow. It sold $35 billion of two-year notes yesterday. The previous five- year sale on July 25 drew bids for 2.71 times the amount of debt offered, up from 2.61 times at the auction in June. To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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