By Susanne Walker Dec. 9 (Bloomberg) -- Treasuries were little changed as stocks fluctuated and the U.S. prepared to sell $21 billion of 10-year notes, the second of three auctions this week totaling $74 billion. Government securities rose earlier after Standard & Poor’s cut the credit outlook for Spain to “negative.” The difference between 2- and 30-year securities reached the widest amount in 17 years before today’s 10-year offerings and tomorrow’s $13 billion sale of 30-year debt. “We are trading off stocks more than anything else,” said James Combias, New York-based head of Treasury trading at Mizuho Securities USA Inc., one of 18 primary dealers that trade with the Federal Reserve. “The auction will be fine. There will be enough of a bid from people who want to park in Treasuries for the next three weeks.” Benchmark 10-year note yields rose one basis point, or 0.01 percentage point, to 3.39 percent at 11:57 a.m. in New York, according to BGCantor Market Data. The 3.375 percent security maturing in November 2019 fell 1/32, or 31 cents per $1,000 face amount, to 99 31/32. The 10-year note to be sold today yielded 3.401 percent in pre-auction trading. S&P revised Spain’s outlook to negative from stable. The ratings company, which downgraded Spain from AAA to AA+ in January, said the country will experience a “more pronounced and persistent deterioration in its public finances and a more prolonged period of economic weakness versus its peers,” than it had expected in January. ‘At Their Posts’ “The ratings agencies seem to be taking notice of the high ratio of GDP to outstanding debt in some countries and it’s something the market is taking note of,” said Thomas L. di Galoma, head of U.S. rates trading at Guggenheim Partners LLC, a New York-based brokerage for institutional investors. Treasuries rose yesterday as the record-tying $40 billion sale of three-year notes drew the lowest yield since January after a reduction in Greece’s credit rating spurred demand for the relative safety of U.S. debt. The spread between yields on 2-year and 30-year Treasuries touched 366 basis points today. The last time the spread was so large was 1992, when the Federal Reserve cut interest rates to bolster growth after a recession. “The market has been waiting with trepidation for today and tomorrow’s auctions,” Chris Ahrens, head of interest-rate strategy in Stamford, Connecticut at primary dealer UBS Securities LLC, wrote in a note to clients. “The conventional wisdom has it that underwriting all this long duration is going to be difficult in a quiet December market. The only problem with the reasoning is that it hasn’t particularly held true. Yesterday’s price action suggested that portfolio managers are at their posts again this week.” ‘Significant Headwinds’ Yesterday’s three-year note auction drew a yield of 1.223 percent, compared with the average forecast of 1.229 percent in a Bloomberg News survey of six of the Fed’s primary dealers. Investors bought 2.98 times the available securities, compared with an average of 2.75 for the past 10 sales. The last auction of 10-year notes, a record $25 billion offering on Nov. 10, drew a yield of 3.47 percent, below the average forecast of 3.475 percent in a Bloomberg News survey. The yield on the two-year note rose one basis point to 0.73 percent. It dropped 11 basis points in the first two days of the week after Fed Chairman Ben S. Bernanke said on Dec. 7 that the U.S. economy faces “significant headwinds” and that the target rate for overnight lending between banks would stay low for an “extended period.” Greek Notes Yields on two-year Greek government notes added 20 basis points today to 2.94 percent following a jump of 66 basis points yesterday. Fitch Ratings cut Greece’s credit rating yesterday one step to BBB+, the third-lowest investment grade, on concern the nation may struggle to meet its debt commitments as public finances deteriorate. “After the recent news flow and flight to quality, we expect a solid set of results and are especially mindful of the degree of direct bidder participation in the U.S.,” Charles Diebel, head of European interest-rate strategy at Nomura International Plc in London, said in an investor note today. Treasury Secretary Timothy Geithner told Congress that the Obama administration is extending the $700 billion financial- rescue program until October, saying the U.S. must hold on to the money in case of new financial shocks. Drawn Criticism In a letter today to congressional leaders, Geithner said the administration doesn’t expect to deploy more than $550 billion of the funds. The Treasury may expand the Federal Reserve’s Term Asset-Backed Securities Loan Facility, an effort to jumpstart securitization markets, as well as continue to use the Troubled Asset Relief Program to help struggling homeowners and small companies, he said. The TARP, passed in October 2008 to prevent a collapse of the financial system, has drawn criticism from lawmakers in both parties for aiding the biggest banks rather than average citizens. The Obama administration, preparing the ground for an extension, has emphasized that it’s winding down assistance for Wall Street firms. To contact the reporters on this story: Susanne Walker in New York at swalker33@bloomberg.net. To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net;

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