Treasury 10-year notes advanced for the first time in five days on speculation the recent rout may be hard to sustain before a report forecast to show U.S. manufacturing expanded in June at a slower pace. The benchmark government securities were headed for their steepest weekly loss in almost five months on reduced concern Greece will default. The seven-day relative strength of 10-year notes dropped yesterday below 30, an indication the securities may be due for an increase. “We were at the cheaper end of the recent range, so a little bit of a bounce isn’t surprising,” said Dan Mulholland, a trader in New York at RBC Capital Markets, the investment banking unit of Canada’s biggest bank. Yields on 10-year notes dropped two basis points, or 0.02 percentage point, to 3.14 percent at 9:14 a.m. in New York, according to Bloomberg Bond Trader prices. The 3.125 percent securities maturing in May 2021 gained 5/32, or $1.56 per $1,000 face amount, to 99 27/32. The 10-year note yields rose yesterday to 3.22 percent, the highest level since May 19. They have increased 29 basis points this week, the most since an advance of 31 basis points during the five days ended Feb. 4. Two-year note yields were little changed at 0.45 percent after rising yesterday to 0.51 percent, the highest level since May 26. They were headed for a weekly gain of 12 basis points. U.S. Debt Returns Treasuries returned 2.4 percent in the second quarter after losing 0.1 percent in the first three months of the year, according to Bank of America Merrill Lynch indexes. The Institute for Supply Management’s manufacturing index fell to 52 in June, the lowest level since August 2009, from 53.5 in the previous month, according to the median forecast of 77 economists in a Bloomberg News survey. Figures greater than 50 signal expansion. The Thomson Reuters/University of Michigan’s final survey of U.S. consumer sentiment for June may show dimmer job prospects and pricier goods weighed on consumer sentiment. The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of expectations for consumer prices over the next decade known as the break-even rate, dropped to 2.37 percentage points after touching 2.42 percentage points yesterday, the widest spread since May 13. Greece may receive as much as 85 billion euros ($124 billion) in new financing, including a contribution from private investors, in a second bailout aimed at preventing default and ending the euro-region’s debt crisis, according to an Austrian Finance Ministry official. Aid for Greece Euro-area nations and private investors will contribute 70 percent of that aid, with the International Monetary Fund offering the rest, Thomas Wieser, head of the ministry’s economic policy and financial markets department, said at a briefing yesterday in Vienna. “The risk that Greece will default in the short term is gone,” said Takuya Yamamoto, who helps oversee the equivalent of $118.4 billion as a portfolio manager in Tokyo at Diam Co., a unit of Japan’s second-biggest life insurer. “The U.S. economy will move past this soft patch and gradually recover.” In the U.S., President Barack Obama is trying to reach a compromise with opposition Republican lawmakers who are seeking spending cuts before they agree to raise the nation’s borrowing limit, currently capped at $14.3 trillion. The Treasury Department has said it has until Aug. 2 before its ability to pay the U.S. debt expires. Geithner Tenure Treasury Secretary Timothy F. Geithner’s potential departure from the administration would force Obama to assemble a new economic team as he enters a re-election campaign that’s likely to be dominated by voter concern over jobs. Geithner has told Obama that he’s considering leaving the administration after the president reaches an agreement with Congress to raise the national debt limit, according to a person familiar with the matter. “I live for this work,” Geithner said yesterday at the Clinton Global Initiative in Chicago. “It’s the only thing I’ve ever done. I believe in it. We have a lot of challenges as a country. I’m going to be doing it for the foreseeable future.” Treasuries also fell this week as the Federal Reserve completed yesterday its $600 billion program of debt buying, which was aimed at capping borrowing costs. The 10-year yield will climb to 3.64 percent by year-end, according to a Bloomberg News survey of financial companies with the most recent forecasts given the heaviest weightings. To contact the reporter on this story: Daniel Kruger in New York at dkruger1@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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