By Wes Goodman Nov. 10 (Bloomberg) -- Treasuries were little changed, snapping a two-day gain, as Asian stocks advanced and the U.S. prepared to sell a record $25 billion of 10-year notes today. Shares extended a global rally, gold traded near a record high and the euro hovered close to its strongest level in 15 months against the dollar, curbing demand for the relative safety of government debt. Former Federal Reserve Chairman Alan Greenspan said a rebound in stocks is “re-liquifying” the economy, after credit markets froze last year. “More and more people are willing to take risk,” said Kei Katayama, who oversees $1.6 billion of non-yen debt in Tokyo as leader of the foreign fixed-income group at Daiwa SB Investments Ltd., part of Japan’s second-biggest investment bank. “There’s a little more room for yields to go up.” The yield on the 10-year note was 3.49 percent as of 2:33 p.m. in Tokyo, according to BGCantor Market Data. The 3.625 percent security maturing in August 2019 traded at 101 1/8. Ten-year yields will rise to 3.79 percent by the middle of next year, according to a Bloomberg survey of banks and securities companies, with the most recent forecasts given the heaviest weightings. Katayama said his portfolio duration is shorter than the benchmark he uses to gauge performance. Duration is a measure of a portfolio’s sensitivity to changes in yield, and a smaller figure indicates a more bearish position. The MSCI Asia Pacific Index of regional shares rose 0.6 percent, rallying for a third day. Stocks, Gold The Standard & Poor’s 500 Index climbed 2.2 percent yesterday, its steepest gain in more than a week. It is up 21 percent this year, recovering from a 38 percent decline in 2008. Gold futures for December delivery advanced to a record $1,111.70 an ounce yesterday. The euro traded at $1.4977 per dollar. It was as strong as $1.5063 on Oct. 26, a level not seen since August 2008. “We have been very fortunate that the stock markets moved back” and are “re-liquifying the whole process,” Greenspan said yesterday at an event in Edmonton, Alberta, presented by Abu Dhabi National Energy Co., the state-controlled energy producer. Yields indicate the central bank is thawing credit markets. The difference between what banks and the Treasury pay to borrow money for three months, the so-called TED spread, narrowed to 21 basis points from 1.35 percentage points at the end of last year. Mortgage Rates U.S. 30-year fixed mortgage rates have fallen to 5.11 percent from this year’s high of 5.74 percent in June, according to Bankrate.com in North Palm Beach, Florida. The 10-year notes scheduled for sale today yielded 3.51 percent in pre-auction trading, rising from 3.21 percent at the prior sale on Oct. 7. Investors bid for 3.01 times the amount on offer last month, versus an average of 2.61 times for the past 10 sales. Indirect bidders, which includes foreign central banks, purchased 47.4 percent of the notes last month and 55.3 percent in September. The U.S. sold $40 billion in three-year securities yesterday and is scheduled to auction $16 billion of 30-year bonds on Nov. 12. Both are record sizes. The Treasury is selling unprecedented amounts of debt as President Barack Obama borrows to fund his stimulus programs. U.S. marketable debt stands at $6.95 trillion and reached a record $7.01 trillion in September. Investor Demand Stock gains weren’t enough to damp investor appetite at the three-year sale yesterday, which drew the strongest demand on record from indirect bidders. The group purchased 68.5 percent of the notes, compared with an average 45.3 percent at the past 10 sales. Investors bid for 3.33 times the amount of debt available, the most since at least 1993. Foreign governments have little choice than to buy Treasuries because they hold so many dollars, with the greenback accounting for 62.8 percent for world currency reserves, according to the International Monetary Fund in Washington. Treasury bulls say unemployment at a 26-year high of 10.2 percent will help keep inflation from quickening, while a decline in the dollar to a 15-month low is making U.S. assets cheaper to overseas investors. “Yields will fall,” said Masaaki Sugihara, who is in charge of foreign fixed income at Toyota Asset Management Co. in Tokyo, which has $12 billion in assets. “The economy is not too strong and not too weak. Inflation will stay low.” The difference between rates on 10-year notes and Treasury Inflation Protected Securities, or TIPS, which reflects the outlook among traders for consumer prices, widened to 2.22 percentage points from almost zero at the end of 2008. The spread is still less than the five-year average of 2.18 percentage points. Treasuries have handed investors a 2.7 percent loss in 2009, while U.S. company bonds rallied 24 percent as investors sought higher-yielding assets, based on indexes compiled by Bank of America Corp.’s Merrill Lynch unit. To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net;

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