By Wes Goodman Nov. 12 (Bloomberg) -- Treasuries rose as Chinese Premier Wen Jiabao said the world faces an uneven economic recovery, spurring speculation growth will revive without spurring inflation. Ten-year yields approached the lowest level in a week after comments from Federal Reserve Bank of Dallas President Richard Fisher and other central bankers spurred bets policy makers will hold interest rates near zero to foster the U.S. economy. The government is scheduled to sell $16 billion of 30-year bonds today, following $40 billion of three-year notes and $25 billion of 10-year debt earlier in the week, all record sizes. “There’s no fear of inflation,” said Kazuaki Oh’e, a bond salesman in Tokyo at Canadian Imperial Bank of Commerce, the nation’s fifth-biggest bank. “The Fed is going to continue with its record-low interest rate. That’s supporting the Treasury market.” The 10-year note yield fell five basis points to 3.44 percent as of 6:51 a.m. in London, according to data compiled by Bloomberg. The 3.375 percent security maturing in November 2019 rose 3/8, or $3.75 per $1,000 face amount, to 99 14/32. The yield declined to 3.43 percent on Nov. 10, a level not seen since Nov. 3. Rates on 30-year bonds dropped four basis points to 4.37 percent, the steepest decline in almost two weeks. A basis point is 0.01 percentage point. ‘Worst Is Over’ “The worst is over,” Wen said in speech televised from a forum in Beijing. “The global economy is starting to recover but a total recovery will be a slow and bumpy process.” The financial crisis, which started with the collapse of the U.S. property market in 2007, has triggered $1.67 trillion of writedowns and credit losses at banks and other financial institutions and sent the global economy into its first recession since World War II, according to data compiled by Bloomberg. While trading of Treasuries was closed yesterday for Veterans Day in the U.S., government bonds rallied in the U.K. after Bank of England Governor Mervyn King said inflation will probably stay below the central bank’s 2 percent target. The yield on the two-year note, the security most sensitive to interest-rate expectations, fell to 0.698 percent, matching the lowest level since at least January 1992, when Bloomberg began collecting the data. Japan’s 10-year government bonds rose the most since June today after a central bank report showed producer prices dropped in October for a 10th month. Rates Appropriate Fisher said Nov. 10 that the central bank’s current interest-rate stance remains “appropriate” as U.S. economic growth and inflation may persist below ideal levels into 2011. The Fed cut its target for overnight loans to a range of zero to 0.25 percent in December. It reiterated its pledge to keep borrowing costs at a record low for an “extended period” in a statement last week. Ten-year Treasuries offer a yield of 4.75 percent after accounting for the cost of living in the U.S., versus the five- year average of 1.48 percent. The 30-year bonds scheduled for sale today yielded 4.42 percent in pre-auction trading, rising from 4.009 percent at the prior sale on Oct. 8. Investors bid for 2.37 times the amount on offer last month, versus an average of 2.39 times for the past 10 sales. Indirect bidders, which include foreign central banks, purchased 34.5 percent of the debt last month, versus the 10- sale average of 40.25 percent. 30-Year Sale Today’s bond auction follows a $40 billion three-year sale and a $25 billion 10-year offering earlier in the week, which were also record amounts. The Treasury Department is selling unprecedented amounts of debt as President Barack Obama borrows to fund stimulus programs. U.S. marketable debt totals $6.95 trillion and reached $7.01 trillion in September, the most ever. Sales of coupon-bearing Treasuries will increase to $2.38 trillion in the fiscal year that began Oct. 1, from $1.81 trillion in the prior 12 months, Goldman Sachs Group Inc. said in a report on Oct. 20. The company is one of the 18 primary dealers required to bid at the government debt sales. Supply Concerns The amounts are making some investors say today’s gains won’t last. “There’s no end to the Treasury sales in sight,” said Tsutomu Komiya, an investor in Tokyo at Daiwa Asset Management Co., which oversees $77 billion as part of Japan’s second- largest brokerage. “Supply will send bond yields higher.” Ten-year yields will rise to 4 percent by the end of 2010, he said. A Bloomberg survey of banks and securities companies projects the figure will be 4.22 percent, with the most recent forecasts given the heaviest weightings. The difference between two- and 30-year yields was 3.57 percentage points, close to the most in three months. Yields on long-term bonds rose this year as the U.S. increased debt sales, while shorter-term securities are anchored by the Federal Reserve’s record-low rate. The increase in long-term yields means bonds are lagging behind shorter securities. Investor Losses Two-year notes have returned 1.4 percent in 2009, 10-year securities handed investors a 7.4 percent loss, while 30-year bonds tumbled almost 24 percent, based on indexes compiled by Bank of America’s Merrill Lynch unit. At this week’s three-year auction, investors bid for 3.33 times the amount of debt on offer. Indirect bidders purchased 68.5 percent of the securities, the most on record. The 10-year notes drew bids of 2.81 times and the indirect class bought 47.3 percent of the notes. Treasuries have been trounced by corporate bonds this year, which rallied 25 percent, the Merrill indexes show. A revival in the U.S. economy is spurring demand for higher-yielding assets. Gold rose to a record $1,122 an ounce today. The euro, at $1.5003, is near a 15-month high against the dollar. The MSCI World Index of shares has returned almost 30 percent this year. Japanese investors purchased a net 343.4 billion yen ($3.8 billion) of foreign bonds in the week ended Nov. 6, according to the Ministry of Finance in Tokyo. It was the most since the week ended Sept. 11. Japan bought a net $105 billion of U.S. government debt through August, exceeding China as the biggest foreign buyer and boosting its holdings to $731 billion, or more than 10 percent of the total market, Treasury Department data show. To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net;

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