By Susanne Walker March 30 (Bloomberg) -- Treasuries fell as reports showed home prices in 20 U.S. cities unexpectedly rose in January and consumer confidence increased this month more than forecast, reducing demand for relative safety. U.S. debt was headed for a 1 percent monthly loss before this week’s nonfarm payrolls report, which is forecast to show employers added the most jobs in three years. “The market will probably trade down into nonfarm payrolls,” said Ted Ake, head of government and agency trading at Societe Generale in New York. “Expectations are that the numbers will be fairly high.” The 10-year note yield increased 2 basis points, or 0.02 percentage point, to 3.89 percent at 10:34 a.m. in New York, according to BGCantor Market Data. The price of the 3.625 percent security due in February 2020 dropped 6/32, or $1.88 per $1,000 face amount, to 97 26/32. The S&P/Case-Shiller index of property values in 20 cities increased 0.3 percent in January from a month earlier on a seasonally adjusted basis. The median forecast of 18 economists in a Bloomberg News survey was for a 0.3 percent drop. “Things are getting a bit better,” said Tom Roth, senior Treasury trader in New York at Mitsubishi UFJ Financial Group Inc. “It helped to push prices a little bit lower.” The Conference Board’s confidence index for U.S. consumers increased to 52.5 this month from 46.4 in February, the New York-based group said today. The median forecast of 73 analysts in a Bloomberg News survey was for an increase to 51 from a previously reported 46. U.S. Payrolls Employers added 184,000 jobs this month, the most since March 2007, according to the median forecast of 81 economists in a Bloomberg News survey. The unemployment rate probably held at 9.7 percent, according to analysts. The Labor Department’s payrolls report is due April 2. The government is scheduled to announce on April 1 the sizes of note and bond auctions next week as President Barack Obama borrows record amounts to sustain the nation’s economic recovery. Greece’s 5 billion euros ($6.7 billion) of seven-year notes dropped after the nation sold the securities yesterday. The yield premium widened about 0.34 percentage point to 3.68 percentage points over benchmark German debt, according to ABN Amro Bank NV’s prices. Prime Minister George Papandreou’s government must raise as much as 10.5 billion euros by the end of May to avoid rekindling the budget crisis that prompted the European Union to step in on March 25 with a rescue plan that backstopped Greece’s finances. Evans’s View Federal Reserve Bank of Chicago President Charles Evans, speaking today in Hong Kong, repeated his view that the U.S. central bank is likely to maintain an “accommodative” interest-rate stance for at least six months to support the momentum of economic growth. “We had dovish comments from Evans focusing on elevated unemployment, which suggests plenty of resource slack still in the economy,” said Ian Lyngen, a government bond strategist at CRT Capital Group LLC in Stamford, Connecticut. The Fed reiterated at the conclusion of its March 16 policy meeting that borrowing costs will stay low for an “extended” period of time. Kansas City Fed President Thomas Hoenig repeated his dissent, saying such a stance is no longer warranted. Interest-rate futures on the Chicago Board of Trade show a 47 percent chance U.S. policy makers will raise the zero to 0.25 percent target lending rate by at least a quarter-percentage point by September, up from 32 percent odds a month ago. Debt Market Support The Fed is expected to complete its $1.75 trillion commitment to support debt markets by the end of this month. The central bank ended its $300 billion Treasury purchase program in October. The central bank and U.S. agencies have lent, spent or guaranteed $8.2 trillion up to the end of 2009 to unfreeze credit markets and lift the economy out of the recession, according to data compiled by Bloomberg. The drop in U.S. debt this month has pared its gain in the first quarter to 0.9 percent, according to Bank of America Merrill Lynch indexes. The 10-year swap spread, which turned negative for the first time on March 23, was negative 4.3 basis points today, compared with negative 4.9 basis points yesterday. A negative swap spread means the Treasury yield is higher than the swap rate, which typically is greater given that the floating payments are based on interest rates that contain credit risk, such as the London interbank offered rate. To contact the reporter on this story: Susanne Walker in New York at swalker33@bloomberg.net

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