Treasuries gained, pushing the yield on the 10-year note to the lowest level in 19 months, as a government report showed orders for durable goods increased in July less than economists forecast. Yields on five-year notes dropped to the lowest level since December 2008 before the government’s $36 billion auction of the securities. The two-year note yield was within 2 basis points of the record low after Standard & Poor’s cut Ireland’s credit rating yesterday, sustaining demand for the safest assets. “The data supports the price action,” said Sean Murphy, Treasury trader in New York at Societe Generale. “With each disappointing number, it brings to the market the idea that the Fed may need to act with more quantitative easing.” The yield on the 10-year note decreased 5 basis points, or 0.05 percentage point, to 2.44 percent at 8:59 a.m. in New York. The price of the 2.625 percent security maturing in August 2020 advanced 15/32, or $4.69 per $1,000 face amount, to 101 21/32. The yield touched 2.4157 percent, the lowest since January 2009. The two-year note yield slid 1 basis point to 0.48 percent after touching a record low 0.4542 percent yesterday. The yield on the five-year note decreased 4 basis points to 1.28 percent after touching the 20-month low of 1.2775 percent. Orders for durable goods advanced 0.3 percent in July after a revised 0.1 percent drop in the previous month, the Commerce Department reported. The median forecast in a Bloomberg News survey of 75 economists was for a 3 percent increase. U.S. Housing Commerce Department figures today will show demand for new houses was little changed last month at a 330,000 annual rate, according to the median forecast of 74 economists in a Bloomberg News survey. The report is due at 10 a.m. New York time. The National Association of Realtors reported yesterday that sales of existing homes tumbled a record 27 percent last month after a revised 7.1 percent reduction in June. In an attempt to bolster the economy, Federal Reserve policy makers said on Aug. 10 that the central bank would maintain its holdings of securities at $2.05 trillion to prevent money from draining out of the financial system. The Fed will purchase about $18 billion of U.S. debt by the middle of September using the money from principal payments on its holdings of agency debt and agency mortgage-backed securities. The central bank bought $1.35 billion of Treasuries yesterday, increasing the total to $7.51 billion since the program began Aug. 17. Fed Chairman Ben S. Bernanke will discuss the outlook for the economy on Aug. 27 at a conference in Jackson Hole, Wyoming. Two-Year Auction The $37 billion two-year note auction yesterday drew a record low yield of 0.498 percent. The sale’s bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 3.12, compared with an average of 3.19 at the past 10 auctions. The five-year Treasury notes being sold today yielded 1.320 percent in pre-auction trading, dropping from 1.796 percent at the previous sale on July 28. Investors bid for 3.06 times the amount on offer last month, compared with the average of 2.72 times for the past 10 auctions. The $7 billion sale this week of 30-year Treasury Inflation Protected Securities, or TIPS, drew a yield of 1.768 percent, the lowest ever for sales of the debt dating to 1998. The bond auction’s bid-to-cover ratio was a record high 2.78. The government will auction $29 billion in seven-year debt tomorrow. Altogether, the $102 billion of notes being sold this week is the smallest total for this combination of securities since May 2009. To contact the reporter on this story: Susanne Walker in New York at swalker33@bloomberg.net

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