By Wes Goodman April 29 (Bloomberg) -- Treasuries snapped a decline from yesterday after the International Monetary Fund said Greece’s spreading debt crisis may cut demand for riskier assets. Futures contracts also gained and the euro traded near a one-year low as Greece’s debt crisis spread and investors sought the safest securities. The Treasury is scheduled to sell $32 billion of seven-year notes today, the last of four auctions this week totaling a record $129 billion. “I’m a bull,” said Geoff Howie, a senior vice president at MF Global Singapore Ltd., part of the world’s largest broker of exchange-traded futures and options. “The whole refinancing program for Greece hasn’t even been discussed yet. The risk pendulum is going to swing toward aversion, and that is going to help Treasuries.” The yield on the benchmark 10-year note declined one basis point to 3.75 percent as of 7:22 a.m. in London, according to data compiled by Bloomberg. The 3.625 percent security due in February 2020 gained 3/32, or 94 cents per $1,000 face amount, to 98 30/32. Ten-year futures for June delivery climbed 6/32 to 117 6/32. The contract will advance to 119 in May or June, Howie said. European policy makers may need to come up with as much as 600 billion euros ($792.7 billion) in aid or buy government bonds if they are to stamp out the region’s spreading fiscal crisis, said economists at JPMorgan Chase & Co. and Royal Bank of Scotland Group Plc. Greece Turmoil Bonds and stocks plunged across Europe in the past week as Greece’s budget turmoil forced the country to seek a bailout from the European Union and the IMF, and Standard & Poor’s downgraded Greece, Portugal and Spain. “The main risk scenario is one of worsening global risk aversion, should the jitters spill over to some of the larger European economies,” the IMF said in a report today. The euro traded at $1.3217 after falling to $1.3115 yesterday, the lowest level since April 28, 2009. The seven-year notes being sold today yielded 3.23 percent in pre-auction trading, declining from 3.374 percent at the previous sale of the securities on March 25. Investors bid for 2.61 times the amount on offer last month, compared with an average of 2.76 for the past 10 auctions. Indirect bidders purchased 41.9 percent of the securities, versus the 10-sale average of 55.2 percent. U.S. Rebounding Treasury bears argue that the economy is improving. A Labor Department report today will show initial claims for unemployment insurance fell for a second week, according to the median forecast in a Bloomberg News survey of economists. U.S. gross domestic product expanded at a 3.3 percent pace in the first quarter, adding to 5.6 percent growth in the last three months of 2009, a Commerce Department report will show tomorrow, according to a separate survey. “The economic situation is better than before,” said Jaemin Cheong, a bond trader in Seoul at Industrial Bank of Korea, the nation’s largest lender to small- and mid-sized companies. “There is room for yields to go up. There’s no inflation now, but the inflation will go up quickly in the future.” He’s avoiding Treasuries, he said. The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices, widened to 2.41 percentage points today, the most in 12 weeks. Inflation Expectations Record levels of government borrowing will send yields higher around the globe, Pacific Investment Management Co., which runs the world’s biggest mutual fund, said in a report. “The world has just too much debt in the market, so we believe long-term real rates will have to adjust upward globally,” Tomoya Masanao, the head of portfolio management for Japan, wrote on the company’s Web site. The U.S. 10-year real rate, or what investors get after accounting for inflation, declined to 1.47 percent from 3.49 percentage points a year ago. Federal Reserve officials signaled they’ll need to see more evidence of sustained gains in the jobs market before ending their pledge to keep the benchmark lending rate at a record low for an “extended period.” Policy makers said yesterday that while the labor market is “beginning to improve,” employers remain reluctant to hire, and consumer spending is restrained by tight credit and limited wage gains. Inflation will remain “subdued for some time,” they said in a statement after a two-day meeting in Washington. To contact the reporters on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net.

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