By Wes Goodman Dec. 3 (Bloomberg) -- Treasuries were little changed, with 10-year yields at the highest level in a week, before an industry report that analysts said will show the U.S. economic revival is spreading beyond manufacturing. The Treasury Department is scheduled to announce today how much it plans to raise by selling three-year notes on Dec. 8, 10-year notes on Dec. 9 and 30-year bonds on Dec. 10. Wrightson ICAP LLC, an economic advisory firm in Jersey City, New Jersey, predicts the package will total $74 billion. The government raised $81 billion the last time it sold this combination of securities in November. “The economy is recovering,” said Satoshi Okumoto, a general manager at Fukoku Mutual Life Insurance Co. in Tokyo, which has the equivalent of $62.6 billion in assets. “There is room to be bearish.” The yield on the 10-year note climbed two basis points to 3.33 percent as of 2:01 p.m. in Tokyo, according to data compiled by Bloomberg. It is the highest level since Nov. 25. The 3.375 percent security maturing in November 2019 fell 1/8, or $1.25 per $1,000 face amount, 100 13/32. The Institute for Supply Management’s index of non- manufacturing businesses that make up almost 90 percent of the economy rose to 51.5 in November, the most since April 2008, from 50.6 the previous month, according to the median forecast of 71 economists surveyed by Bloomberg. Two-Year Yields Two-year yields were little changed at 0.72 percent, or 12 basis points above the record low set in December last year. The difference between two- and 10-year rates widened to 2.61 percentage points from 1.45 percentage points at the end of 2008. Shorter maturities are more influenced by what the Federal Reserve does with borrowing costs, while longer bonds tend to move on the outlook for inflation and a plan at the Treasury Department to lengthen the average maturity of the nation’s debt. Central bank statements on Nov. 4 and Nov. 24 repeated the Fed’s view that it would keep the rate “for an extended period.” It cut its target to a range of zero to 0.25 percent in December of last year. The broad Treasury market handed investors a 1.6 percent loss so far this year, indexes compiled by Bank of America’s Merrill Lynch unit show. Government securities fell as President Barack Obama increased the U.S. debt to record levels, rising to $7.01 trillion in September, to combat the U.S. recession. Corporate Bonds Corporate bonds returned 26 percent as investors sought higher-yielding assets, based on the Merrill indexes. Pacific Investment Management Co., which runs the world’s biggest bond fund, said investors who are pushing up stocks and high-yield debt should instead be preparing for a period of slower-than-usual economic growth. Dubai World, the state-owned company that is seeking to delay payments on some of its $59 billion in obligations, shows investors shouldn’t forget the lessons of the crisis, Michael Gomez, co-head of emerging markets at Pimco, wrote in a report on the company’s Web site. Equity markets around the world have surged this year, with the MSCI World Index gaining 28 percent, prompting economists including New York University Professor Nouriel Roubini to warn of a “bubble” in financial markets. Pimco, in Newport Beach, California, is a unit of Munich- based insurer Allianz SE. Treasuries declined yesterday as Federal Reserve Bank of Richmond President Jeffrey Lacker said the U.S. economy “has hit bottom” and a recovery is “solidly under way.” ‘How Rapidly’ Two-year note yields, most sensitive to monetary policy, rose as Lacker said in a speech in Charlotte, North Carolina, that policy makers won’t have any problem removing monetary stimulus, and instead face the challenge of determining “when and how rapidly” to do so. Economic conditions improved “modestly” across the U.S, the Fed said in its Beige Book survey. “It’s a combination of Lacker’s comments and the Beige Book” that sent Treasuries down, said Ray Remy, head of fixed income in New York at Daiwa Securities America Inc., one of 18 primary dealers that trade directly with the Fed. “The Beige Book was mixed, but it’s showing strength in pockets of the country and areas of the economy.” To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net.

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