By Wes Goodman Feb. 10 (Bloomberg) -- Treasuries rose, following their steepest decline this year, as an index of consumer confidence from ABC News added to speculation the U.S. economic recovery will slow. Government securities gained for the fourth time in five days after ABC said its confidence index remained below zero, indicating negative responses outnumbered positive ones. The Treasury Department is scheduled to sell a record-matching $25 billion of 10-year notes today, the second of three auctions this week totaling $81 billion. “The recovery may lose momentum,” said Hideo Shimomura, who helps oversee the equivalent of $55.7 billion as chief fund investor at Mitsubishi UFJ Asset Management Co., part of Japan’s biggest bank by assets. “Housing prices may decline again. Treasury yields will go down toward the end of the year.” The yield on the 10-year note fell two basis points to 3.63 percent as of 1:28 p.m. in Tokyo, according to data compiled by Bloomberg. The 3.375 percent security due in November 2019 rose 1/8, or $1.25 per $1,000 face amount, to 97 29/32. Ten-year yields will be 3.25 percent or less by Dec. 31, Tokyo-based Shimomura said. Ten-year yields increased nine basis points yesterday, the most since Dec. 21, on speculation Europe will arrange a financial rescue for Greece, damping demand for the relative safety of U.S. debt. Greek Prime Minister George Papandreou’s struggle to contain the European Union’s largest budget deficit had sent the euro to an eight-month low and pushed up bond yields in the region, threatening the stability of financial markets. Spread Near Record The difference between two- and 10-year rates was 2.81 percentage points, near the record 2.90 percentage points set Jan. 11. Two-year rates tend to track the Federal Reserve’s target for overnight lending because of their shorter maturity. Yields on longer-term bonds are more influenced by inflation and by the size of the government’s debt. The ABC confidence index was minus 48 for the seven days ending Feb. 8 from minus 49 the week before, the company said late yesterday in New York. U.S. economic growth will slow to 2.7 percent in the first quarter from 5.7 percent in the last three months of last year, Bloomberg surveys of banks and securities companies show. Germany is considering assistance for Greece, two lawmakers from Chancellor Angela Merkel’s governing coalition said yesterday. Rescue Signs Signs of a rescue helped ease investor concern that worsening government finances in Europe would derail the global recovery from last year’s economic recession. The euro rose 1.1 percent yesterday and the Dow Jones Industrial Average rallied the most since November. The yield on the Greek 10-year bond slid the most in at least 12 years. “If a rescue plan passes, the flight to quality will unwind,” said Tsutomu Komiya, who handles U.S. government debt in Tokyo at Daiwa Asset Management Co., which has $77 billion in assets. “Risk assets and bond yields will rise.” The notes scheduled for sale today yielded 3.66 percent in pre-auction trading, compared with 3.754 percent at the previous offering of the securities on Jan. 13. Investors bid for 3 times the amount on offer last month, versus an average of 2.76 times for the past 10 auctions. Indirect bidders, the group that includes foreign central banks, bought 29 percent of the securities, versus the 10-sale average of 39.3 percent. Treasury Auctions The Treasury sold $40 billion of three-year notes yesterday and is scheduled to auction $16 billion of 30-year bonds tomorrow. At the three-year sale, investors bid for 2.83 times the available debt, compared with an average of 2.85 for the past 10 auctions. Consumer spending will decelerate this year, Ed McKelvey, senior U.S. economist at Goldman Sachs Group Inc. in New York, wrote in a report yesterday. “Growth will slow materially during the first half of 2010,” the report said. Goldman is one of the 18 primary dealers that are required to bid at the government debt sales. To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net.

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