By Susanne Walker and Lukanyo Mnyanda Dec. 23 (Bloomberg) -- Treasury 10-year notes rose for the first time in four days after a report showed spending by U.S. consumers rose less than forecast in November. Ten-year note yields declined from their highest levels in four months as personal spending rose 0.5 percent, below the median forecast in a Bloomberg News survey for a 0.7 percent increase. The U.S. will sell a record-tying $118 billion of notes next week, according to Wrightson ICAP LLC, an economic advisory firm in Jersey City, New Jersey, before a Treasury announcement today. “The market has been oversold from a technical perspective,” said John Spinello, chief technical strategist in New York at Jefferies Group Inc., one of 18 primary dealers that trade with the Federal Reserve. “We will continue to go higher in yields, but we will get a relief rally over the next couple of days given the breakdown we have had.” The benchmark 10-year note yield fell four basis points to 3.71 percent at 8:36 a.m. in New York, according to BGCantor Market Data. It earlier touched 3.77 percent, the highest level since Aug. 11. The 3.375 percent security due November 2019 rose 11/32, or $3.44 cents per $1,000 face amount, to 97 7/32. The yield increased 23 basis points this week. Treasuries capped their steepest back-to-back decline since July yesterday after data showed sales of existing U.S. homes rose more than forecast, stoking speculation the recovery will fuel inflation. Record Auctions The U.S. may sell $44 billion in two-year notes on Dec. 28, $42 billion in five-year debt the next day and $32 billion in seven-year securities the day after that, according to Wrightson. A $44 billion two-year auction would match the record offerings of October and November. A $42 billion five- year sale and a $32 billion seven-year offering would equal the all-time highest issues set last month. Efforts by the U.S. to cut its current-account deficit mean other nations accumulate fewer dollars through trade, leaving them with less money to buy Treasuries, Chinese central banker Zhu Min said on Dec. 17 at a forum in Beijing. “When the U.S. has to fund its deficit through the combination of issuing more Treasuries and printing more dollars, it is inevitable that the dollar will continue to weaken,” Zhu said. The difference in yields between two- and 10-year notes widened to a record this week as investors speculated the recovery will reduce demand at debt sales. Home Sales Rise The spread increased to as much as 288 basis points yesterday and was 285 basis points today. The previous record of 281 basis points was reached on June 5, when Treasuries plunged after a government report showed the smallest decline in U.S. payrolls in eight months. Ten-year note yields touched 4 percent the following week, the highest level in 2009. Existing home sales increased 7.4 percent to a 6.54 million annual rate, the highest since February 2007, from a revised 6.09 million pace the prior month, the National Association of Realtors said yesterday in Washington. The Reuters/University of Michigan final index of consumer sentiment rose to 73.8, according to the median forecast of 59 economists in a Bloomberg survey before today’s release. The difference between yields on Treasury Inflation Protected Securities due in 10 years and nominal notes, a measure of the outlook for consumer prices, climbed to as high as 2.38 percentage points yesterday, the most since July 2008. President Barack Obama is borrowing unprecedented amounts for spending programs. U.S. marketable debt increased to a record $7.17 trillion in November from $5.80 trillion at the end of last year. Treasuries of all maturities have fallen 3.2 percent this year, according to Bank of America Merrill Lynch indexes. Technical Indicators Thirty-year Treasury bonds are set to decline, pushing yields put to 4.8 percent, the highest in more than six months, according to a Citigroup Inc. report citing technical indicators. “U.S. 30-year yields have completed a morning star-like pattern on the daily chart suggesting higher yields ahead,” analysts led by Tom Fitzpatrick in New York wrote to clients in a report dated yesterday. A so-called morning-star trend is a pattern caused by three candle graphs, which traders use as an indication that the downtrend is about to reverse. Daily momentum indicators such as the moving average convergence/divergence, or MACD, also show that yields are likely to increase. The 30-year yield’s MACD was 0.0729, compared with 0.0553 for the so-called signal line, based on data compiled by Bloomberg. A rise of the MACD above the signal line suggests yields are in an upward trend. To contact the reporter on this story: Susanne Walker in New York at swalker33@bloomberg.net; Lukanyo Mnyanda in London at lmnyanda@bloomberg.net.

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