By Anchalee Worrachate and Theresa Barraclough Aug. 10 (Bloomberg) -- Treasuries fell for a sixth day, the longest losing streak since October, before the U.S. government sells $75 billion in debt this week. Ten-year notes and 30-year bonds, which make up $38 billion of the auctions this week, led declines after Laura Tyson, an adviser to President Barack Obama, said yesterday the U.S. economy may be on the cusp of a recovery. Ten-year yields climbed to the highest level in two months before government reports this week that economists say will show retail sales and industrial production rose and first-time jobless claims slid. “The bear is in charge in the Treasury market at the moment,” said Nick Stamenkovic, a fixed-income strategist in Edinburgh at RIA Capital Markets Ltd., a broker for banks and investors. “Supply is an issue, but more importantly it’s the improvement in sentiment toward risk assets amid signs the U.S. economy is recovering that is putting the market on the defensive.” The yield on the benchmark 10-year note rose 1 basis point, or 0.01 percentage point, to 3.87 percent, as of 8:45 a.m. in London, according to BGCantor Market Data. The 3.125 percent security maturing in May 2019 fell 2/32, or 63 cents per $1,000 face amount, to 94. Ten-year yields earlier climbed to 3.89 percent, the highest since June 11. The yield could advance to 4 percent before the bonds start to rise in value, Stamenkovic said. Asian stocks advanced, with Japan’s Nikkei 225 Stock Average adding 1.1 percent and the MSCI Asia Pacific Index of regional shares gaining 1 percent. Unprecedented Borrowing The U.S. will sell $37 billion of three-year notes tomorrow, $23 billion in 10-year securities the following day and $15 billion in 30-year bonds on Aug. 13. Indirect bidders, a class of investors that includes foreign central banks, bought 25.5 percent of the notes offered at the previous sale of three- year securities on July 7. President Barack Obama has pushed the nation’s marketable debt to an unprecedented $6.45 trillion in an effort to spur economic growth and support the financial system. The budget shortfall will reach $1.85 trillion in the year ending Sept. 30, equivalent to 13 percent of the nation’s economy, according to the nonpartisan Congressional Budget Office. Declines in 10-year Treasuries were tempered as technical charts indicate recent losses may have been excessive. The 10-day relative strength index for 10-year yields increased to 68 today, approaching the 70 level that suggests selling of the securities is overdone. Buffett Buys Bonds Warren Buffett’s Berkshire Hathaway Inc. is buying corporate debt and securities issued by governments outside the U.S. as the billionaire investor’s spending on stocks falls to the lowest in more than five years. Berkshire held about $11.1 billion in foreign government bonds in its insurance units as of June 30, compared with $9.6 billion three months earlier, the company said in a regulatory filing Aug. 7 announcing second-quarter results. Fund managers became less bearish on the outlook for Treasuries through the end of the year, a survey by Ried, Thunberg & Co. shows. The company’s sentiment index rose to 44 for the seven days ended Aug. 7, from 42 the week before. A reading below 50 means investors expect prices to fall. The economic analysis firm in Jersey City surveyed 24 investors overseeing $1.305 trillion. Quantitative Easing Policy makers will keep the target rate at a range of zero to 0.25 percent when the Federal Open Market Committee meets on Aug. 12, a Bloomberg survey showed. The Federal Reserve announced on March 18 a plan to cap consumer borrowing costs by purchasing up to $300 billion of U.S. debt over six months, a policy known as quantitative easing. The central bank bought $243.463 billion since the program began on March 25. Credit-market yields indicate that the Fed is having some success. The London interbank offered rate, or Libor, for three- month dollar loans dropped to a record low of 0.46 percent on Aug. 7. Libor is about 21 basis points more than the upper end of the Fed’s target range for overnight loans, narrowing from last year’s high of 3.32 percentage points in October. “Exit strategies remains the name of the game,” Ashley Davies, a Singapore-based strategist at UBS AG, wrote today in a note to clients. The spread between two- and 10-year yields expanded, which “suggests that the market thinks that the U.S. economy is normalizing to a certain extent and that the Fed will hike in due course and that the economy can handle that.” The difference between two- and 10-year yields was 2.56 percentage points, from 2.45 percentage points a week ago, suggesting investors are demanding higher yields for longer maturities because of the threat inflation will pick up as the economy starts growing. Consumer Prices Consumer prices were unchanged in July after a 0.7 percent gain the previous month, according to the median estimate of economists in a Bloomberg survey before the Labor Department reports the figure on Aug. 14. The spread between yields on 10-year notes and Treasury Inflation Protected Securities, or TIPS, which reflects the outlook among traders for consumer prices, was 2.01 percentage points today, from near zero at the end of last year. The difference has averaged 2.2 percentage points during the past five years. Futures on the Chicago Board of Trade indicated a 60 percent chance that the Fed will increase the target lending rate by its January meeting, compared with 52 percent odds a month earlier. ‘Another Good Week’ Ten-year yields surged 37 basis points last week as a Labor Department report showed employers cut fewer jobs than forecast in July and a gauge of manufacturing climbed to an 11-month high. U.S. stocks jumped, with the Standard & Poor’s 500 Index adding 1.3 percent on Aug. 7. Retail sales rose 0.7 percent last month, after gaining 0.6 percent in June, and initial jobless claims fell to 545,000 last week, according to separate Bloomberg surveys before the Aug. 13 reports. Industrial production increased 0.4 percent in July, the Federal Reserve will say the following day, according to a separate survey. “Median forecasts for all of this stuff suggest it should be another good week for stocks, while bond yields will probably continue to head higher,” Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney, wrote in a report today. To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.

Source