By Cordell Eddings and Matthew Brown Dec. 3 (Bloomberg) -- Treasuries fell for a third day, the longest losing streak in almost a month, as initial jobless claims unexpectedly declined and the U.S. prepared to announce the amounts of next week’s three note and bond sales. Ten-year note yields rose to the highest level in almost two weeks as the number of Americans filing first-time claims for unemployment benefits fell last week to the lowest level in more than a year. The Labor Department will say tomorrow that the unemployment rate held at a 26-year high of 10.2 percent in November, a Bloomberg survey shows. “The economic data was stronger than expected,” said Anshul Pradhan, an interest-rate strategist in New York at primary deal Barclays Plc. “The market is now looking for any guidance on tomorrow’s employment data, and over the next week how long-end auctions will get absorbed.” The yield on the 10-year note advanced eight basis points to 3.39 percent at 9:21 a.m. in New York, according to BGCantor Market Data, the highest level since Nov. 23. The 3.375 percent security due November 2019 fell 22/32, or $6.88 per $1,000 face amount, to 99 27/32. The U.S. plans to sell 3-year notes on Dec. 8, 10-year notes on Dec. 9 and 30-year bonds on Dec. 10. The package will total $74 billion, according to Wrightson ICAP LLC, an economic advisory firm in Jersey City, New Jersey. The government raised $81 billion the last time it sold this combination of securities in November. The Treasury Department’s announcement is due at 11 a.m. in Washington. ‘Certainly Encouraging’ Initial jobless claims fell by 5,000 to 457,000 in the week ended Nov. 28, the fewest since September 2008. Economists forecast jobless claims would rise to 480,000 from the 466,000 previously reported for the prior week, according to the median of a Bloomberg News survey. “It’s not time to declare victory, but two weeks in a row of declines in initial jobless claims are certainly encouraging,” said Jay Mueller, who manages about $3 billion of bonds at Wells Fargo Capital Management in Milwaukee. “Employment is still the key determinant for the Fed to ultimately move away from its ultra- easing policy, so this is moving the market.” A separate Labor Department report showed the productivity of U.S. workers rose at an 8.1 percent annual rate in the third quarter, the fastest pace in six years. “Businesses in the third quarter had stretched their existing labor force about as far as they could,” Tony Crescenzi, a market strategist and portfolio manager at Newport Beach, California-based Pacific Investment Management Co., wrote in a note to clients today. “As a result, companies, fearing a loss of market share in a now growing economy, might become compelled to either stop cutting jobs or, in some cases, recall workers they let go when demand for goods and services plummeted last year.” $7.01 Trillion Two-year note yields, among the most sensitive to interest rates, rose the most in over a month yesterday as Federal Reserve Bank of Richmond President Jeffrey Lacker said the U.S. economy “has hit bottom” and a Fed report said economic conditions improved “modestly.” 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. Government securities fell this year as President Barack Obama increased the U.S. debt to a record $7.01 trillion in September to fund spending programs and service deficits. Treasuries have lost 1.6 percent so far this year, indexes compiled by Bank of America’s Merrill Lynch unit show. Corporate bonds returned 26 percent as investors sought higher-yielding assets, based on the Merrill indexes. Ten-year note yields will climb to 3.81 percent by the middle of next year, according to a Bloomberg survey of banks and securities firms, with the most recent forecasts given the heaviest weightings. ‘Reasonable Pace’ Investors should sell shorter-maturity Treasuries because yields are below fair value and their recent ranges, Jan Loeys, global head of market strategy in London at JPMorgan Chase & Co wrote in a research report. “Two-year Treasury yields are approaching their all-time lows recorded in December of last year,” he wrote. “We expect them to move steadily higher as quantitative easing ends and more Fed tightening is priced in. Our forecast is for two-year yields to reach 0.9 percent by the end of the year.” 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 most likely outcome is that the economy will grow at a reasonable pace next year,” Lacker said yesterday. Policy makers face the challenge of determining “when and how rapidly” to remove monetary stimulus, he said. To contact the reporters on this story: Cordell Eddings in New York at ceddings@bloomberg.net; Matthew Brown in London at mbrown42@bloomberg.net.

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