By Justin Carrigan July 16 (Bloomberg) -- Treasuries rose for the first time in four days, the yen strengthened and U.S. stock futures fell after CIT Group Inc. said it probably won’t get federal aid, fueling speculation the lender is on the brink of bankruptcy. Yields on 10-year Treasury notes fell 2 basis points to 3.58 percent at 11:08 a.m. in London. The yen advanced more than 1 percent against the Swedish krona and New Zealand dollar. Futures on the Standard & Poor’s 500 Index slid 0.4 percent, indicating the gauge may retreat for the first time this week. Europe’s Dow Jones Stoxx 600 Index fluctuated between gains and losses as Nokia Oyj cut its 2009 market-share forecast. Investors retreated from higher-yielding assets as CIT’s distress signaled more pain for financial companies that have already reported almost $1.5 trillion in losses and credit- market writedowns since the start of 2007. Gains in Treasuries and the yen were limited after China said its economy expanded 7.9 percent in the second quarter. “We’re seeing risk aversion creeping back into the market,” said Henrik Gullberg, a currency strategist in London at Deutsche Bank AG, which Euromoney Institutional Investor Plc ranks as the world’s biggest currency trader. “Growth bears who don’t believe in the recovery story were keen to jump on to the negative news. It could halt the recent improvement.” Ten- and 30-year notes led Treasuries higher after New York-based CIT, which took $2.33 billion of aid in December, said yesterday that talks with regulators have broken off and “there is no appreciable likelihood of additional government support.” Nokia, Electrolux The difference in yield, or spread, between the two- and 10-year notes widened 1 basis point, or 0.01 percentage point, to 261 basis points, the most since June 4. Nokia, the world’s biggest maker of mobile phones, tumbled as much as 7.8 percent, the most in almost seven months, after saying market share will be flat this year. Electrolux AB rallied 9 percent after the world’s second-largest appliance maker posted profits that beat analysts’ estimates. U.S. futures retreated as investors awaited earnings from JPMorgan Chase & Co. before the open of regular trading in New York. Google Inc. and International Business Machines Corp. will post results after the market’s close. The S&P 500 has surged 6.1 percent this week as companies from Goldman Sachs Group Inc. to Johnson & Johnson reported profits that beat analysts’ estimates and Intel Corp. forecast sales that exceeded projections. Data on U.S. jobless claims may show the number of Americans filing for unemployment benefits fell to 553,000 last week, according to the median estimate of 41 economists surveyed by Bloomberg. That would be the lowest level since January. China GDP Developing-nation stocks rose, sending the MSCI Emerging Markets Index to its best three-day gain in almost two months, as China’s report on gross domestic product boosted industrial companies. The MSCI index climbed 0.5 percent to 769.97 bringing its rally since July 13 to 6.5 percent. The Dubai Financial Market General Index added 1.5 percent after the United Arab Emirates central bank said it may buy more bonds from Dubai. Crude oil for August delivery fell 1.1 percent to $60.89 a barrel on the New York Mercantile Exchange, after surging 3.4 percent yesterday. The New Zealand dollar dropped 0.8 percent against the dollar, the most in more than a week, after Fitch downgraded the outlook on the country’s debt rating to “negative,” citing the nation’s current account deficit. Credit Risk Credit-default swaps rose for the first day this week, signaling deteriorating perceptions of credit quality, with the high-yield Markit iTraxx Crossover Index climbing 18 basis points to 732, according to JPMorgan prices. The derivatives, which are used to hedge against losses and speculate on companies’ credit, contributed to the failures last year of Lehman Brothers Holdings Inc. and American International Group Inc. and the seizure in credit markets. The cost of protecting CIT debt from default rose as much as 2 percentage points to 36 percent, or $3.6 million, upfront and $500,000 dollars a year, according to CMA DataVision prices for credit-default swaps. A contract insures $10 million of debt for five years. A bankruptcy filing by CIT would be the first by a company that took money from the Troubled Asset Relief Program, the Treasury’s $700 billion fund designed to keep lenders solvent by investing the public’s money in the financial industry. CIT’s collapse would be the biggest bank failure measured by assets since regulators seized Washington Mutual Inc. in September. CIT reported $3 billion in deposits at the end of the first quarter. To contact the reporter on this story: Justin Carrigan in London at jcarrigan@bloomberg.net

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