Treasuries were little changed before a report forecast to show retail sales shrank for a seventh month and as the government prepared to sell $14 billion in 30-year bonds today, the largest issue in three years. Yields earlier fell on speculation the U.S. government’s economic stimulus plan may not be enough to turn the economy around any time soon. The stimulus bill is headed for passage in Congress after lawmakers agreed on a $789 billion package including government spending and tax cuts. “The bonds are starting to back off here as we are seeing some pre-auction position squaring,” said John Canavan, a fixed- income strategist at Stone & McCarthy Research Associates in Princeton, New Jersey. The yield on the 10-year note fell two basis points, or 0.03 percentage point, to 2.77 percent at 8:22 a.m. in New York. The two-year note yielded 0.87 percent, down two basis points from yesterday. The stimulus package is smaller than the $838 billion bill approved earlier this week by the Senate and the $819 billion plan the House passed last month. Among the compromises were smaller tax cuts of $400 for individuals and $800 for families, compared with $500 and $1,000 proposed by President Barack Obama’s administration. Outlook on Stimulus The plan will be insufficient to avert a 2 percent contraction in the U.S. economy this year, the biggest decline since 1946, as consumer spending posts its longest slide on record, according to a monthly Bloomberg News survey. The yield on the 30-year bond rose three basis points to 3.48 percent before the sale of the securities today. Investors bid for 2.07 times the amount of debt on offer at the last 30-year sale on Nov. 13. The average for the past 10 auctions is 2.18. The bonds were sold to yield 4.31 percent at the November auction. The government is issuing unprecedented amounts of debt as it raises money to battle the recession. It sold three- and 10- year securities earlier this week. The U.S. budget deficit widened more than economists forecast last month as spending soared and corporate tax receipts shrank, a Treasury report showed yesterday. The excess of spending over revenue in January rose to $83.8 billion, versus a $17.8 billion surplus a year earlier. U.S. Retail Sales Sales at U.S. retailers probably fell 0.8 percent in January, a Commerce Department report will show today, according to the median forecast in a Bloomberg News survey of 72 economists. A report from the Labor Department will show jobless claims stayed near 26-year highs, a separate survey showed. “Without the U.S. consumer stabilizing, it is difficult to paint any kind of sustainable picture of recovery,” Owen Job, an interest-rate strategist in London at Nomura International Plc, wrote in a report today. The stimulus package “will help but is likely to do little more than ameliorate the extent of the current slowdown,” he wrote. Treasuries extended their gains as stock markets fell, spurring demand for the safest assets. The Dow Jones Stoxx 600 Index of European shares retreated for a third day, dropping 1.4 percent. U.S. stock-index futures declined. Longer-term Treasuries rose yesterday after U.S. Treasury Secretary Timothy Geithner failed to provide details on his financial-rescue strategy in an appearance before a Senate panel. Lawmakers are working on a separate proposal made up of spending programs and tax cuts that Obama said is necessary to spur the economy. TED Spread Yields indicate government and Federal Reserve efforts have yet to restore credit markets to where they were before trading froze last year. The difference between what banks and the Treasury pay to borrow for three months, the so-called TED spread, widened by two basis points to 94 basis points today. The spread averaged 27 basis points from 2002 through 2006, before the credit crisis began in August 2007. The London interbank offered rate, or Libor, for three-month dollar loans, was little changed at 1.23 percent. It was 1.08 percent on Jan. 14. Average 30-year fixed mortgage rates rose to 5.25 percent in the seven days ended Feb. 5 from 4.96 percent three weeks earlier, according to loan finance company Freddie Mac. Rates are about 2.26 percentage points higher than 10-year Treasury yields, widening from 1.62 percentage points five years ago.

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