Treasuries headed a fourth monthly decline, the longest losing streak in more than two years, as signs the U.S. economy is recovering backed the case for the Federal Reserve to reduce stimulus. Benchmark 10-year notes fluctuated after a report showed U.S. consumer spending rose for a third month in July. This week’s five- and seven-year note auctions attracted the least demand in four years. Treasuries trimmed their monthly decline this week as investors weighed the prospect of U.S. military action against Syria. “The data has been pretty decent,� said Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen. “We have seen some safe-haven flows on the conflict in Syria but the Fed tapering story is still there. We still believe we are on track for tapering in September.� The benchmark 10-year yield was little changed at 2.77 percent at 8:40 a.m. in New York, having increased 16 basis points, or 0.16 percentage point, this month, according to Bloomberg Bond Trader data. The price of the 2.5 percent note maturing in August 2023 was 97 23/32. The 10-year yield will be “around 3 percent� at the end of 2013, Danske Bank’s von Mehren said. Bonds Returns U.S. government securities have lost 0.7 percent in August through yesterday, after declining 3.5 percent during the previous three months, according to the Bloomberg U.S. Treasury Bond Index. (BUSY) The four-month losing streak is the longest since the period ended March 2011. U.S. financial markets will be shut Sept. 2 for Labor Day. The Federal Open Market Committee began its third round of quantitative easing in September with mortgage bond purchases, and started buying Treasuries in January. The committee has pledged to maintain the program until the labor market has improved substantially. The Fed will trim its monthly purchases of $85 billion at the next scheduled meeting Sept. 17-18, according to 65 percent of economists in a Bloomberg survey this month. Consumer purchases, which account for about 70 percent of the economy, rose 0.1 percent after a revised 0.6 percent increase the prior month that was larger than previously estimated, the Commerce Department reported today in Washington. The median forecast in a Bloomberg survey of economists called for a 0.3 percent rise. Incomes increased 0.1 percent. Jobs Data U.S. payrolls rose 180,000 this month, and the jobless rate held at 7.4 percent, according to economists surveyed before the Labor Department reports the figures on Sept. 6. Minutes of the Fed’s July FOMC meeting released on Aug. 21 showed policy makers were “broadly comfortable� with Chairman Ben S. Bernanke’s plan to taper purchases this year if the economy strengthens, with a few saying a reduction may be needed soon. Fed Bank of St Louis President James Bullard is scheduled to speak on the U.S. economy in Memphis today. Investors bid for 2.43 times the amount of seven-year notes for sale yesterday, the lowest ratio since May 2009. The five-year sale on Aug. 28 drew bids of $2.38 for every dollar sold in debt, the least since July 2009. The Aug. 27 auction of $34 billion of two-year notes, the shortest maturity U.S. coupon debt, attracted the most demand since April. The prospect of U.S.-led military action against Syria spurred a rally in Treasuries this week, pushing the 10-year yield down five basis points. Syria Talks White House spokesman Josh Earnest said the administration still plans to publicly release “before the end of the week� an unclassified version of the intelligence assessment of the alleged chemical weapons attack in Syria. U.K. Prime Minister David Cameron failed to gain parliamentary approval for a military response. “Any rally in Treasuries on a targeted military strike in Syria would be short-lived and, if it got to 2.60 percent, we’d be strongly biased toward selling,� Westpac’s McColough, said of the 10-year yield. The benchmark yield will probably trade in a range of 2.60 to 3.20 percent through year-end, he said. U.S. government securities may also be supported today by month-end buying to match market indexes. Funds that manage portfolios against benchmark indexes, including the Barclays U.S. Aggregate Index, typically buy longer-maturity Treasuries near the end of the month to align the interest-rate sensitivity of their holdings with the gauges. To contact the reporter on this story: Susanne Walker in New York at swalker33@bloomberg.net; David Goodman in London at dgoodman28@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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