Treasuries fell, trimming gains after yesterday’s biggest rally this year, on speculation an industry report today will show U.S. job growth quickened. Government securities also slid after benchmark 10-year yields shrank to almost negative 1 percent when accounting for costs in the economy, souring some investors who say bond rates need to rise as the economy grows. The so-called real yield has deteriorated from negative 84 basis points on Feb. 21. ADP Employer Services may say companies in the U.S. added 215,000 workers in February, versus 170,000 in January, according to a Bloomberg News survey of economists. Ten-year yields rose two basis points to 1.96 percent as of 6:40 a.m. in London, Bloomberg Bond Trader prices showed. The 2 percent security due in February 2022 slid 6/32, or $1.88 per $1,000 face amount, to 100 10/32. The rate declined seven basis points yesterday, or 0.07 percentage point, the most since Dec. 28. The record low was 1.67 percent set Sept. 23. “Treasuries are very expensive,� said Tsutomu Komiya, who helps oversee the equivalent of $114.8 billion as an investor in Tokyo at Daiwa Asset Management Co., a unit of Japan’s second- biggest brokerage by market value. “The U.S. economy is improving. The labor market is warming.� The 10-year rate will advance to 2.53 percent by year-end, according to predictions from banks and securities companies, with the most recent forecasts given the heaviest weightings. Daiwa Asset Management’s Komiya predicts 2.5 percent. Japan’s 10-year yield declined half a basis point to 0.98 percent. This year’s range has been 0.935 percent to 1.005 percent. The five-year yield fell one basis point to 0.28 percent, the least since October 2010. Employment Report A U.S. Labor Department employment report on March 9 will show employers added more than 200,000 jobs for a third month, according to a Bloomberg survey. U.S government securities rallied yesterday as Europe’s economy shrank and investors weighed Greece’s chances of persuading creditors to agree to a bond swap under its private- sector-involvement plan. Societe Generale SA, France’s second-biggest bank, Assicurazioni Generali SpA (G) and UniCredit SpA (UCG) joined firms saying they would participate in the debt plan. The Standard & Poor’s 500 Index of shares slid 1.5 percent yesterday, the most since December. European Contraction Europe’s gross domestic product shrank 0.3 percent in the fourth quarter from the third, the most since 2009, according to the European Union’s statistics office. The Federal Reserve is scheduled to buy as much as $2.25 billion of U.S. debt due from February 2036 to February 2042 today, according to the Fed Bank of New York website. The central bank is in the process of swapping $400 billion of shorter-maturity Treasuries in its holdings with longer-term bonds to cap borrowing costs, and it plans to finish the exchange in June. Ten-year rates have been within 21 basis points of 2 percent since the start of November, after officials announced the plan on Sept. 21. Policy makers also pledged in January to keep their benchmark interest rate close to zero until at least late 2014. Yield Outlook “We’re looking at the 10-year Treasury probably being stuck right around 2 percent for at least the rest of this year,� Michael Hood, a strategist at JPMorgan Investment Management, said yesterday on the “Bloomberg Surveillance� radio program with Ken Prewitt and Tom Keene. “The Fed is telling you they’re not planning on hiking until late 2014. You’ve got very limited prospects for any kind of an inflation scare. You’ve got a scarcity of high-quality assets.� JPMorgan Investment Management oversees $1.3 trillion and is a unit of the largest U.S. bank. The U.S. carries the top debt ranking from Moody’s Investors Service and Fitch Ratings. Standard & Poor’s assigns its second-highest grade. Benchmark yields will climb 10 basis points per month as a rate increase approaches, David Keeble, the global head of interest-rate strategy in New York for Credit Agricole Securities (USA) Inc., wrote in a report yesterday. The yield will be 4 percent by the end of June 2013, according to Credit Agricole, which is a unit of France’s second-biggest bank. The difference between yields on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, was 2.17 percentage points. The average over the past decade is 2.14 percentage points. Treasury Auctions Government securities also halted their gain before the U.S. announces tomorrow the size of three auctions of coupon- bearing debt. The Treasury will probably sell $32 billion of 3-year notes, $21 billion of 10-year securities, and $13 billion of 30- year bonds, according to Wrightson ICAP LLC, an economic advisory company in Jersey City, New Jersey, that specializes in government finance. The auctions will take place over three days starting March 12. There will be $30 billion of Treasuries that are maturing and available for reinvestment, while the sales will raise $36 billion of new money, according to Wrightson. 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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