By Susanne Walker and Paul Dobson Feb. 4 (Bloomberg) -- Treasuries gained as initial claims for jobless benefits unexpectedly rose, productivity increased less than forecast and global stocks fell on concern some European countries face difficulty financing budget deficits. The 10-year note’s yield fell the most in almost three weeks as investors shunned the debt of European Union nations with the worst budget deficits, led by Portuguese bonds. “People are thinking the economy is not out of the woods yet and it will take a bit longer for the economy to recover,” said Dan Mulholland, a Treasury trader in New York at RBC Capital Markets, one of 18 primary dealers that trade with the Federal Reserve. The yield on the benchmark 10-year note fell six basis points, to 3.64 percent at 10:07 a.m. in New York, according to BGCantor Market Data. It dropped as much as seven basis points, the most since Jan. 15. A basis point is 0.01 percentage point. The yield climbed earlier to 3.71 percent, which matched the highest level since Jan. 19. The Standard & Poor’s 500 Index fell 1.6 percent. Initial claims for unemployment benefits increased to 480,000 in the week ended Jan. 30, the most in seven weeks, from 472,000 the prior week, Labor Department figures showed today in Washington. Economists in a Bloomberg survey forecast a decline to 455,000. Worker Productivity A measure of employee productivity rose at a 6.2 percent annual rate, capping the biggest one-year gain since 2003, the Labor Department said today in Washington. Economists in a Bloomberg survey forecast a 6.5 percent rate. U.S. factory orders rose more than anticipated in December, a report from the Commerce Department showed. Orders increased 1 percent, matching the revised gain in the previous month. A report tomorrow is forecast to show the U.S. added the most jobs last month in two years. U.S. payrolls rose by 15,000 workers last month after an unexpected loss of 85,000 in December, according to a separate Bloomberg survey before tomorrow’s report. “People are searching for a real clue for them to make some directional bets in the market; people are waiting for payrolls tomorrow,” said James Combias, New York-based head of Treasury trading at primary dealer Mizuho Securities USA Inc. ‘Black Swan’ Nassim Nicholas Taleb, author of “The Black Swan,” said “every single human being” should bet U.S. Treasury bonds will decline, citing the policies of Federal Reserve Chairman Ben S. Bernanke and the Obama administration. Taleb, a principal at Universal Investments LP in Santa Monica, California, said without being more specific that investors should bet on a rise in long-term Treasury yields as long as Bernanke and White House economic adviser Lawrence Summers are in office. Taleb spoke at a conference in Moscow. President Barack Obama has increased the U.S. marketable debt to a record $7.27 trillion as he tries to sustain the recovery from last year’s recession. Obama projects the U.S. budget deficit will rise to a record $1.6 trillion in the 2011 fiscal year. Portugal’s bonds fell on concern the nation will struggle to cut its budget deficit. Reducing it will require “difficult” measures, and the economy is unlikely to catch up with European counterparts any time soon, the central bank’s Governor Vitor Constancio said Feb. 2. “It is important that markets don’t lose sight of the fiscal woes facing the PIGS (Portugal, Ireland, Greece, Spain),” wrote Martin Mitchell, head government bond trader at the Baltimore unit of Stifel Nicolaus & Co., a St. Louis-based brokerage firm, in a note to clients. “Sovereign CDSs are jumping.” Credit-Default Swaps Credit-default swaps on Portugal’s government debt soared 32 basis points to a record 226.5, according to CMA DataVision prices. Contracts on Greece also jumped, rising 25.5 basis points to 423, while Spain increased 17 basis points to 168. The U.S. Treasury, in its quarterly refunding announcement yesterday, said it will sell a record-matching $40 billion in 3- year securities, $25 billion of 10-year debt and $16 billion in 30-year bonds next week. The auctions will be held over three days starting Feb. 9. The government “believes that the current auction calendar provides debt managers with sufficient flexibility to address a range of expected borrowing needs,” said Matthew Rutherford, the Treasury’s deputy assistant secretary for federal finance, according to minutes of an advisory committee meeting. The Treasury also said it’s considering more frequent sales of Treasury Inflation Protected Securities, or TIPS, to improve liquidity. One possible addition is a second reopening of 10- year TIPS, which would start in July if implemented, the department said. To contact the reporters on this story: Susanne Walker in New York at swalker33@bloomberg.net; Paul Dobson in London at pdobson2@bloomberg.net

Source