By Lukanyo Mnyanda and Wes Goodman Nov. 12 (Bloomberg) -- Treasuries rose after Chinese Premier Wen Jiabao said the world faces an uneven recovery, spurring speculation inflation will be contained and boosting demand for the fixed payments of bonds. The gains pushed the 10-year yield to the lowest level in more than a week as futures on U.S. stocks declined. Federal Reserve Bank of Dallas President Richard Fisher and other central bankers signaled this week that officials will hold interest rates near zero to bolster the economy. The government is scheduled to sell $16 billion of 30-year bonds today, after record sales of $40 billion of three-year notes and $25 billion of 10-year debt this week. “The economy is still in recovery and so far we have deflation forces across the globe, so inflation is not a concern at the moment,” said Philippe-Henri Burlisson, who helps manage about $95 billion as managing director for fixed income at Groupama Asset Management in Paris. “There are still a lot of long-term investors looking to buy bonds.” The 10-year note yield fell 5 basis points to 3.45 percent as of 7 a.m. in New York, according to BGCantor Market Data. It dropped earlier to 3.42 percent, the least since Nov. 3. The 3.375 percent security maturing in November 2019 rose 11/32, or $3.44 per $1,000 face amount, to 99 13/32. Yields on 30-year bonds dropped 3 basis points to 4.39 percent. A basis point is 0.01 percentage point. ‘Worst Is Over’ “The worst is over,” Wen said in a 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.” Futures on the Standard & Poor’s 500 Index fell 0.4 percent. 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 10-year gilt has declined 14 basis points since Nov. 6 and was at 3.74 percent today. The difference in yield, or spread, between U.K. and U.S. 10-year securities was 30 basis points today, down from 39 basis points at the end of last week. ‘Dovish’ Bank “A dovish Bank of England inflation report led investors to scale back monetary policy expectations and triggered another rally,” a team including Giuseppe Maraffino, a fixed-income strategist in Milan at UniCredit SpA, wrote in a report today. Fisher said Nov. 10 that U.S. interest rates remain “appropriate” as 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. The 30-year bonds scheduled for sale today yielded 4.38 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 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. 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.” Yield Spread 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 spread between two- and 30-year yields was 3.56 percentage points, from 1.91 percentage points on Dec. 31. 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. 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 Merrill Lynch. 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 reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net;

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