Treasury two-year yields were at a record low before government and industry reports that economists said will show initial claims for jobless benefits rose and existing-home sales fell. Ten-year yields were near the least in 15 months after Federal Reserve Chairman Ben S. Bernanke said the economic outlook is “unusually uncertain” and policy makers are prepared “to take further policy actions.” The U.S. will announce today it plans to sell $105 billion in two-, five- and seven-year notes next week, the smallest monthly offering of the securities since June 2009, according to a Bloomberg News survey of 10 primary dealers, companies required to bid at the sales. “Yields have room to fall further,” said Satoshi Okumoto, who helps oversee the equivalent of $65.6 billion in assets as a general manager at Fukoku Mutual Life Insurance Co. in Tokyo, “The Fed won’t be able to raise interest rates for at least two years.” Fukoku bought in June, he said. The two-year Treasury yielded 0.5519 percent at 1:02 p.m. in Tokyo, the lowest level on record. The 0.625 percent note due June 2012 traded at 100 1/8, according to BGCantor Market Data. Ten-year securities yielded 2.87 percent, after dropping to 2.85 percent yesterday, the least since April 2009. Initial jobless claims rose to 445,000 last week from 429,000 in the prior period, according to a Bloomberg survey of economists before the Labor Department report today. The National Association of Realtors will say sales of previously owned homes fell in June by the most this year, a separate survey showed. Ready to Act Treasuries advanced yesterday as Bernanke told the Senate Banking Committee that central bankers were ready to act to support growth. “An unusual outlook may call for unusual measures, and that means the Fed may take more action as needed, which would lead to lower rates,” said Suvrat Prakash, a strategist in New York at BNP Paribas, one of the 18 primary dealers. Tools to boost the economy include reducing the rate paid on banks’ reserves held at the Fed and using the central bank’s balance sheet, Bernanke said. Officials haven’t decided which they might use, he said. The balance sheet reached the record level of $2.354 trillion on May 19, the result of central bank purchases of bonds to help reduce borrowing costs. Yields Will Rise The central bank chief is scheduled to address House lawmakers today, and he may use the opportunity to highlight areas of strength in the U.S. economy, 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. “Yields are still going to increase from here,” he said. “Bernanke outlined the problems. Now I see him coming out and saying what he’s going to do about the problems.” Howie had been predicting 10-year yields of 3.5 percent in the third quarter, and he said he’s considering reducing the target to 3.25 percent. A Bloomberg survey of banks and securities firms projects the rate will climb to 3.32 percent by year-end. The survey gives the heaviest weightings to the most recent forecasts. Some parts of the credit market are showing increased demand for risk, Howie said. The London interbank offered rate, which banks pay for three-month dollar loans, fell for a fifth day yesterday to 0.506 percent, the lowest level in two months. The TED spread, the difference between what banks and the U.S. Treasury pay to borrow for three months, declined to 36 basis points from this year’s high of 49 basis points in June. Extra Stimulus Economic data over the past month that were weaker than analysts projected have prompted investors to speculate the Fed will increase monetary stimulus to spur economic growth and reduce a jobless rate from close to a 26-year high. Policy makers have kept the target for overnight loans between banks in a record-low range of zero to 0.25 percent since December 2008. Deflation, or a general decline in prices, doesn’t pose an immediate threat to the economy,Bernanke said. The difference between rates on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices, narrowed to 1.70 percentage points from this year’s high of 2.49 percentage points in January. It was 1.68 percentage points on July 20, the least since October. To contact the reporters on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net.

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