Treasuries were little changed before the government sells a record $32 billion of five-year notes amid increasing concern U.S. borrowing is reaching unprecedented levels. U.S. securities earlier gained as stock futures declined. The Treasury will also sell $22 billion of seven-year notes tomorrow as it issues debt to spur the shrinking economy. President Barack Obama told Congress yesterday the rescue of banks will probably cost more than the $787 billion already committed. “It’s all about supply,” said David Ader, head of U.S. government bond strategy at Greenwich, Connecticut-based RBS Greenwich Capital, one of the 16 primary dealers that trade with the Federal Reserve and are required to bid in Treasury auctions. “Everything else will be an excuse to trade supply.” The five-year note yield rose one basis point, or 0.01 percentage point, to 1.90 percent at 8:46 a.m. in New York, according to BGCantor Market Data. The price of the 1.75 percent security maturing in January 2014 dropped 2/32, or 63 cents per $1,000 face amount, to 99 10/32. The sale of two-year notes yesterday drew a high yield of 0.961 percent, less than the 0.983 percent average forecast in a Bloomberg News survey of nine trading companies. Bids outnumbered the bonds on sale by 2.63 to 1, compared with an average of 2.33 at the prior 10 auctions. Indirect bidders, a group that includes foreign central banks, bought 28.1 percent of the amount sold, compared with an average of 32.1 percent at the past 10 auctions. Treasuries rose earlier as the MSCI World Index pared gains, supporting demand for the safest of assets. Futures on the Standard & Poor’s 500 Index slipped 0.5 percent. ‘Bouts of Indigestion’ Sales of existing homes, scheduled to be reported by the National Association of Realtors at 10 a.m., probably increased to a 4.8 million annual rate in January, according to the median forecast in a Bloomberg News survey of economists. Foreclosure-driven declines in prices have given resales a lift. New-home sales likely plunged to 324,000 in January, a record low, according to the median estimate in another Bloomberg survey in advance of tomorrow’s Commerce Department Report. “We still think the fundamental backdrop is conducive to fixed income internationally even as it may be punctuated by bouts of indigestion due to supply,” said Richard McGuire, a senior fixed-income strategist at Royal Bank of Canada in London. “We see a structurally protracted slowdown accompanied by outright risks of deflation.” Fed Chairman Ben S. Bernanke yesterday told a Senate committee the economic slump may last into 2010. He testifies today to a House panel. More Taxpayer Money Bernanke spurned outright federal control of U.S. banks in favor of a public-private partnership the government would eventually exit. It would use supervision instead of shareholder control to guide major banks, he said. Obama, in his first address to a joint session of Congress, last night framed the U.S. economic crisis as an opportunity to solve some of the nation’s most intractable issues and signaled that more taxpayer money would be needed to end the credit crunch. The U.S. will probably borrow $2.5 trillion during the fiscal year ending Sept. 30, according to primary dealer Goldman Sachs Group Inc. That’s almost triple the $892 billion in notes and bonds it sold in the prior 12 months.

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