Sept. 29 (Bloomberg) -- Treasuries fell for the first time in a week before industry reports that economists said will show consumer confidence improved and manufacturing expanded. Ten- and 30-year debt led the declines as Asian stocks followed gains in U.S. equities, reducing demand for the relative safety of government debt. Benchmark 10-year yields will rise by a third of a percentage point by year-end as the world’s biggest economy improves, Bloomberg News surveys of banks and securities companies show. “This yield level is too low to buy,” said Yasutoshi Nagai, chief economist in Tokyo at Daiwa Securities SMBC Co., a unit of Japan’s second-largest brokerage. “Some market participants believe in economic recovery. Confidence and manufacturing figures will be negative for Treasuries.” The yield on the 10-year note rose three basis points to 3.30 percent as of 1:25 p.m. in Tokyo, according to BGCantor Market Data. The 3.625 percent security due August 2019 fell 7/32, or $2.19 per $1,000 face amount, to 102 22/32. Ten-year yields will climb to 3.64 by the end of year, according to a Bloomberg survey with the most recent forecasts given the heaviest weightings. The economy grew 2.9 percent this quarter, the biggest expansion in two years, as the nation recovered from its deepest recession since World War II, a separate survey showed. The MSCI Asia Pacific Index of shares gained 0.9 percent after the Standard & Poor’s 500 Index rose 1.8 percent. Confidence, Manufacturing Consumer confidence rose to 57 this month, the highest in a year, from 54.1 in August, according to a Bloomberg survey before today’s Conference Board report. The Institute for Supply Management will say on Oct. 1 that its manufacturing index climbed to 54 in September, the most since April 2006, a separate survey showed. Readings above 50 signal expansion. U.S. employers cut fewer jobs this month and household purchases jumped in August, other reports will show this week according to Bloomberg surveys. The decline in Treasuries was tempered on speculation Federal Reserve officials speaking today will reiterate that interest rates are likely to remain near record lows amid an absence of inflation. The difference in yield between 10-year notes and similar- maturity Treasury Inflation Protected Securities, which reflects the outlook among traders for consumer prices, was at 1.75 percentage points, down from this year’s high as 2.13 percentage points in June. ‘Time to Buy’ “It’s definitely the time to buy,” said Hiromasa Nakamura, who helps oversee the equivalent of $38.5 billion as a senior investor in Tokyo at Mizuho Asset Management Co., part of Japan’s second-largest bank. “Low inflation will continue for a while, the Fed will keep interest rates low and yields will decline.” Ten-year yields may fall as low as 2.80 percent by year- end, Nakamura said. Should his predictions prove accurate, investors who buy today would make a 5 percent return, Bloomberg calculations show. Treasuries have handed investors a loss 2.7 percent this year, as measured by Merrill Lynch & Co.’s Treasury Master Index. Treasury holders have made a 0.6 percent return this month. The spread between two- and 10-year yields was at 2.32 percentage points today, after shrinking to 2.30 percentage points, the narrowest since May, amid speculation the Fed will refrain from raising rates as the recovery loses momentum. Interest rates will stay “exceptionally low” for an “extended period,” policy makers said in their most recent policy statement on Sept. 23. Dallas Fed President Richard Fisher will speak in Dallas on the U.S. economy, and Philadelphia Fed President Charles Plosser will talk at an economic summit in Easton, Pennsylvania. The central bank plans to buy notes maturing from May 2012 to November 2013 today as part of its effort to cap consumer borrowing costs. The Fed is purchasing as much as $300 billion of Treasuries in a program that started in March and is scheduled to end next month. To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.

Source