Treasuries fell, snapping a gain from yesterday, before a government report that analysts said will show U.S. retail sales rose in November. The Federal Reserve will hold a policy meeting today as an improving economy eases pressure on officials to increase their bond purchases. The government plans to sell $21 billion of 10- year notes, the second of four auctions of coupon-bearing debt this week. A three-year sale yesterday drew record demand as investors sought a haven from Europe’s bond crisis. “We expect U.S. 10-year yields to move modestly higher toward the middle of next year,� Akifumi Kai, manager of the investment planning department at Dai-ichi Life Insurance Co. in Tokyo, wrote in an e-mail. Yields are poised to climb as concerns about slowing global economic growth and European debt problems abate, according to Dai-ichi, Japan’s second-largest life insurer with the equivalent of $395.4 billion in assets. U.S. 10-year rates rose two basis points to 2.03 percent as of 12:58 p.m. in Tokyo, according to Bloomberg Bond Trader prices. The 2 percent security maturing in November 2021 declined 5/32, or $1.56 per $1,000 face amount, to 99 23/32. The 10-year yield will advance to 2.37 percent by June 30, according to a Bloomberg survey of banks and securities companies, with the most recent forecasts given the heaviest weightings. The projected 0.6 percent gain in retail sales would follow a 0.5 percent advance in October, according to the median forecast of economists surveyed by Bloomberg News before the Commerce Department figure. Fed Purchases The Fed is replacing $400 billion of shorter maturities in its holdings of Treasuries with longer-term debt to cap borrowing costs in a plan it announced in September. It purchased $2.3 trillion of Treasury and mortgage-related bonds from 2008 through June to support the economy. Treasuries rose yesterday as Europe’s sovereign-debt crisis helped drive record demand at the $32 billion three-year auction. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of notes offered, was 3.62, the highest since 1993, when the government began releasing the data. Longer-term U.S. debt gained as investors sought refuge after Moody’s Investors Service said it will review ratings for all European Union countries because a summit last week failed to produce “decisive� measures to end the two-year-old crisis. Shares fell worldwide. “They have no place else to invest their money, with the uncertainty of the stock market and with what’s going on in Europe,� said Michael Franzese, managing director and head of Treasury trading at Wunderlich Securities Inc. in New York. The three-year notes issued in November drew bids for 3.41 times the amount of debt offered, a record at the time. Last month’s 10-year sale attracted bid for 2.64 times, the least at since December 2009. Indirect bidders, the group that includes foreign central banks, bought 41.6 percent of the debt, versus the average of 46.7 for the past 10 sales. 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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