Treasuries fell before an industry report that economists said will show U.S. manufacturing expanded at the fastest rate in almost seven years. Bonds extended declines from February as Asia stocks gained for a third day, curtailing demand for the relative safety of debt. Government securities handed investors a 0.1 percent loss last month, based on Bank of America Merrill Lynch data, as the economy showed signs of improvement. “The U.S. economy is showing fairly good growth,” said Roger Bridges, who oversees the equivalent of $16 billion in Sydney as head of debt at Tyndall Investment Management Ltd., a unit of Nikko Asset Management Co. in Tokyo. “You’ve got to be short,” he said, meaning he is favoring shorter maturities that will fall less if yields rise. Ten-year yields increased one basis point to 3.44 percent as of 6:03 a.m. in London, according to BGCantor Market Data. The price of the 3.625 percent security maturing in February 2021 fell 3/32, or 94 cents per $1,000 face amount, to 101 17/32. Yields will advance to 3.92 percent by year-end, according to a Bloomberg survey of banks and securities companies, with the most recent forecasts given the heaviest weightings. The MSCI Asia Pacific Index of shares climbed 0.9 percent, bringing the three-day advance to 2.5 percent. ISM, Construction The Institute for Supply Management’s factory index rose to 61 in February, the highest since May 2004, from January’s 60.8, according to the median estimate in a Bloomberg News survey of economists. A separate report will show construction spending fell 0.4 percent in January, based on the surveys. Investors have added to inflation bets over the past six months, yields indicate. The difference between rates on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, was 2.41 percentage points. The figure has widened from 1.47 percentage points on Aug. 25, which was 2010’s low. China, America’s largest creditor, increased its holdings of U.S. debt to a record $1.175 trillion in October, according to revised data issued by the Treasury. The Asian nation’s investment totaled $1.16 trillion at year-end, the Treasury Department reported yesterday, raising the figure from the previous $891.6 billion. Japan maintained its place as America’s second-largest lender, with $882.3 billion of Treasuries at year-end, compared with $883.6 billion before the revision. The U.K.’s investment was revised down to $272.1 billion from $541.3 billion. It kept its place as America’s third- largest lender. Fed Purchases Three-year Treasury yields fell three basis points to 1.17 percent yesterday as the Fed bought $6.7 billion of debt and unrest in Libya drove investors to the haven of government notes. Treasuries fell in February on speculation central bank efforts to spur growth will boost the economy in 2011. The Fed is scheduled to buy $1.5 billion to $2.5 billion of Treasuries maturing from August 2028 to February 2041 today as part of its plan to pump money into the economy. It announced in November it would purchase $600 billion of U.S. debt by June 30. Fed Chairman Ben S. Bernanke is scheduled to deliver a semiannual report on monetary policy today to the Senate Banking Committee and is due to testify to the House Financial Services Committee tomorrow. Employment increased by 190,000 workers in February, after a 36,000 gain in January, according to the median forecast of economists surveyed by Bloomberg News before Labor Department data on March 4. The report may also show the jobless rate increased to 9.1 percent from 9 percent, another survey showed. To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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