Treasuries held a two-day decline before the government sells $24 billion of 10-year notes today, the second of three auctions of coupon-bearing debt this week. Ten-year yields stayed higher ahead of data this week that may show gains in retail sales and a decline in jobless claims. Federal Reserve Bank of Philadelphia President Charles Plosser said a decline in unemployment by year-end would warrant a reduction in central bank debt purchases, while Kansas City Fed President Esther George said the bank may trigger instability when it starts to sell assets. Their comments come as officials debate how long they’ll continue buying bonds. “We see higher yields by the end of the year because the market is going to start to price in the Fed action unwinding at some point,� said Martin Whetton, a Sydney-based interest-rate strategist at Nomura Holdings Inc., which sees the 10-year yield at 1.75 percent by March 31 and 2.25 percent by year-end. “U.S. growth forecasts will be raised by some� in the second half of the year, Whetton said. The Treasury 10-year note yield was little changed at 1.98 percent as of 6:49 a.m. in London, according to Bloomberg Bond Trader prices. The rate climbed three basis points, or 0.03 percentage point, in the previous two days, the first consecutive gains since Jan. 29. The 1.625 percent note due in November 2022 was at 96 29/32. The yield climbed to 2.06 percent on Feb. 4, the highest level since April 12. Japan’s 10-year rate fell one basis point to 0.74 percent, the lowest since Jan. 31. Treasury Auction Ten-year notes scheduled for sale today yielded 2.01 percent in pre-auction trading, compared with a nine-month high of 1.86 percent at the previous auction of the securities on Jan. 9. Investors submitted orders to buy 2.83 times the amount of available debt last month. The Treasury Department will also auction $16 billion of 30-year bonds tomorrow. Yesterday’s sale of three-year debt drew a yield of 0.411 percent, compared with a forecast of 0.409 percent in a Bloomberg News survey of seven of the Fed’s 21 primary dealers. Buyers bid for 3.59 times the amount of securities offered, matching the average for the past 10 auctions. Retail sales in the world’s biggest economy probably increased 0.1 percent last month after a 0.5 percent advance in December, according to the median forecast of economists polled by Bloomberg before today’s Commerce Department report. Analysts predicted in a separate survey that claims for unemployment benefits fell to 360,000 in the period ended Feb. 9, compared with 366,000 in the previous week. The Labor Department will publish the figures tomorrow. ‘Rather Bullish’ “A gradual recovery will take place later in the year, but we’re rather bullish on Treasuries in the near term,� said Tomohisa Fujiki, an interest-rate strategist in Tokyo at BNP Paribas SA. The bank sees the 10-year rate at 1.75 percent by the end of the quarter before rising to 2.4 percent by Dec. 31, Fujiki said. The moving average convergence/divergence for the benchmark U.S. yield was 0.0402, below the so-called signal line of 0.0457. The figure is calculated by subtracting the 26-day exponential moving average from the 12-day average. A reading below the signal line indicates the rate may fall. The Bank of America Merrill Lynch U.S. Treasury Index showed the notes were little changed this month after handing investors a 1 percent loss in January, the worst start to a year since 2009. The bank’s MOVE Index, which measures price swings based on options for U.S. debt, dropped to 59.8 basis points yesterday, the least since Jan. 24. Fed Purchases The Fed plans to buy today as much as $1.75 billion of U.S. securities due from February 2036 to November 2042, according to the New York Fed’s website. The central bank is purchasing $85 billion a month of government and mortgage debt in the third round of so-called quantitative easing, or QE. Philadelphia Fed President Plosser said “we should at least have begun backing off on our asset purchases� should his forecast prove right that the unemployment rate will fall to about 7 percent by year-end, in response to questions after a speech yesterday in Stanford, California. Kansas City Fed President George said in remarks yesterday at the University of Nebraska-Omaha that the eventual sale of assets from the central bank’s $3.02 trillion balance sheet “could be potentially disruptive to markets.� At her first meeting in January as a voting member of the Federal Open Market Committee, George opposed a decision to press on with monthly bond purchases aimed at spurring growth and reducing unemployment. To contact the reporter on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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