Treasuries headed for the biggest loss among the world’s bond markets this month as economists said reports over the next three days will show improvement in consumer confidence, employment and home sales. U.S. debt snapped a gain from yesterday as the government prepared to sell $35 billion of five-year notes today and $29 billion of seven-year securities tomorrow. Separate figures today will show U.S. property values fell, based on Bloomberg News surveys of economists, a sign economic growth is less than what’s needed to get the Federal Reserve to raise interest rates. “There is still upward pressure on yields,” said Chungkeun Oh, a fixed-income trader in Seoul at Industrial Bank of Korea, South Korea’s largest lender to small- and mid-sized companies. “The U.S. economy is doing pretty well.” Oh said he is paying fixed rates and receiving floating in the swaps market in case yields climb. Ten-year notes yielded 3.33 percent at 7:37 a.m. in London, according to data compiled by Bloomberg. The 2.625 percent security maturing in November 2020 traded at a price of 94 2/32. Treasuries maturing in more than a year handed investors a 2.1 percent loss in December, the most of 26 bond indexes around the world, according to data compiled by Bloomberg. The Federal Reserve is scheduled to buy $6 billion to $8 billion of Treasuries maturing from June 2013 to November 2014 today as part of its effort to add $600 billion to the economy through June. Growing Confidence Consumer confidence rose to a seven-month high in December, according to the median estimate of economists surveyed before the Conference Board’s report today. Figures Dec. 30 will show initial jobless claims declined and pending home sales advanced, the surveys forecast. Ford Motor Co., which manufacturers the Fiesta and Taurus cars, said Dec. 20 that U.S. auto sales will rise in 2011 from December’s pace. Yields indicate investors added to bets on inflation this month. The difference between rates on 10-year notes and Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the securities, widened to 2.29 percentage points from 2.11 percentage points on Nov. 30. The five-year average is 2.09 percentage points. Trading in Treasuries was scheduled to close at 3 p.m. in Japan and stay shut in the U.K. in observance of Boxing Day, according to the Securities Industry and Financial Markets Association website. Trading will take place as usual in the U.S., the website shows. Dollar Slides The dollar fell the most in two weeks against the euro on speculation today’s property report will show prices slid in October, supporting the case for the Fed to keep its key rate near zero. The greenback slid 0.4 percent to $1.3219 per euro. The Fed cut its target for overnight bank lending to a range of zero to 0.25 percent in December 2008. Treasuries rallied yesterday after the U.S. government’s $35 billion auction of two-year securities, those most sensitive to central bank rates because of their short maturity, drew the highest demand in three months. Bidding amounted to 3.71 times the debt available, the highest since a reading of 3.78 on Sept. 27. Central bank efforts to keep borrowing costs down will cap 10-year yields at 4 percent next year, said Satoshi Okumoto, a general manager at Fukoku Mutual Life Insurance Co. in Tokyo, which has the equivalent of $67.7 billion in assets. The level is 4 percentage points more than the low end of the Fed’s rate target. The widest the spread has ever been was 3.97 percentage points in November 1992, based on Bloomberg data going back to 1971. Okumoto said he views the record as widest level the Fed is willing to tolerate. Auction Demand The five-year notes being sold today yielded 2.10 percent in pre-auction trading, rising from 1.411 percent at the prior sale on Nov 23. Investors bid for 2.65 times the amount on offer last month, less than the average of 2.77 for the past 10 auctions. Indirect bidders, the category of investors including foreign central banks, bought 31.5 percent of the notes, less than the 10-sale average of 42.3 percent. An index of global bonds was poised to fall for a fourth month, the longest decline in two years, on speculation quickening economic growth will lead stocks to outperform debt in 2011. The gauge has declined 2.2 percent since the end of August, according to Bank of America figures. The Standard & Poor’s 500 Index has returned 20 percent during the period, according to data compiled by Bloomberg. Ten-year notes will return about 1 percent in 2011 after interest payments are re-invested, as the yield rises to 3.65 percent, according to a Bloomberg News survey of the Fed’s 18 primary dealers, those companies 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. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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