Treasuries rose, trimming this month’s loss, as Egyptian President Hosni Mubarak defied calls for his resignation, spurring demand for the safest assets. Bonds gained as stock markets fell in Europe and Asia, feeding demand for the relative security of government debt after Treasury yields increased to a nine-month high this week. Data today is forecast to show an index of U.S. consumer confidence rose and the country’s trade deficit widened. “We can expect yields to come down because there is concern that the situation in Egypt will get out of control,” said Kornelius Purps, a fixed-income strategist at UniCredit SpA in Munich. “After the positive performance of Treasury yields in recent weeks, there is potential for a correction today because investors will definitely err on the side of caution.” Ten-year yields slid four basis points to 3.66 percent as of 7:05 a.m. in New York, according to BGCantor Market Data. The 3.625 percent note maturing in February 2021 advanced 11/32, or $3.44 per $1,000 face amount, to 99 23/32. Five-year yields fell three basis points, to 2.36 percent. Mubarak, 82, handed day-to-day powers to Vice President Omar Suleiman while repeating plans to stay on until September elections as thousands crammed into central Cairo demanding an end to his 30-year rule. U.S. President Barack Obama urged Egyptian authorities to take further steps to resolve the crisis. Shares Slump Europe’s Stoxx 600 Index declined 0.4 percent, while the MSCI Asia-Pacific Index fell 0.9 percent. Crude-oil futures climbed as much as 1.2 percent before erasing gains. Treasuries are still headed for a second weekly decline, making them the biggest losers among the world’s largest bond markets this month, as U.S. data added to evidence the world’s largest economy is improving. First-time claims for jobless insurance fell to the lowest since July 2008, the Labor Department said yesterday. U.S. government securities maturing in more than a year have handed investors a 1.5 percent loss this month, among the worst performers of 26 sovereign-bond markets tracked by the European Federation of Financial Analysts Societies and Bloomberg. “The momentum for yields to push higher is very strong,” said Zeal Yin, who helps oversee the equivalent of $51.8 billion as an investor at Shin Kong Life Insurance Co., Taiwan’s second- largest life insurer. “The U.S. economic data are very good.” Trade Deficit The University of Michigan consumer sentiment index likely rose to 75 this month from 74.2 in January, according to a Bloomberg survey before today’s report. Separate data is forecast to show the trade deficit widened to $40.5 billion in December from $38.3 billion a month earlier as the cost of imported oil climbed. A good confidence number could cause Treasuries to “give up the gains,” said Marius Daheim, a senior fixed-income strategist at Bayerische Landesbank in Munich. “The scope is there for an upside surprise, and that would be a negative for the Treasury market.” Egypt’s turmoil won’t support the market all day, he said. The Federal Reserve is scheduled to purchase $6 billion to $8 billion of Treasuries due from August 2016 to January 2018 today as part of its plan to sustain the economic expansion, according to its website. Treasuries fell yesterday after the U.S. sold $16 billion of 30-year bonds, the last of three auctions this week totaling $72 billion of debt. Supply Traction “The market is trying to find some traction coming out of this week’s supply,” said Eric Wand, an interest-rate strategist at Lloyds Bank Corporate Markets. It’s obviously helping sentiment now that’s out of the way and the belly of the curve is very modestly outperforming.” The U.S. Treasury Department said yesterday it will sell $32-billion in three month bills and $30 billion in six-month bills at auction on Feb. 14. It will also sell $9 billion in 30- year inflation-indexed bonds, securities intended to provide investors with a hedge against inflation, it said. Morgan Stanley, one of the 20 primary dealers required to bid at the government debt sales, recommended Treasury Inflation Protected Securities in a report. Core inflation has bottomed and will move gradually higher this year,” Morgan Stanley said in a report yesterday by strategists Anton Heese, Igor Cashyn and Rachael Featherstone. Short-maturity TIPS offer the best value, they wrote. So-called core consumer prices, which exclude food and energy, increased 0.8 percent in December from a year earlier, the Labor Department said Jan. 14. The gain was 0.6 percent in October, a record low based on figures that start in 1958. To contact the reporters on this story: Emma Charlton in London at echarlton1@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net. To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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