Dec. 15 (Bloomberg) -- Treasuries rose, pushing 10-year note yields down from the highest level in seven months, as a government report showed consumer prices advanced in November less than economists forecast. The extra yield investors demand to hold 10-year notes over 2-year debt fell for the first time in four days as Moody’s Investors Service said it may cut Spain’s credit rating. U.S. debt tumbled yesterday after the Federal Reserve said the economic recovery is continuing and maintained its $600 billion program of debt purchases. “The run-up in yields is ahead of itself,” said Dan Greenhaus, chief economic strategist at Miller Tabak & Co. in New York. “The Fed is still on hold, and inflation as evidenced by today’s report is relatively benign.” The yield on the benchmark 10-year note fell six basis points, or 0.06 percentage point, to 3.41 percent at 9:25 a.m. in New York, according to BGCantor Market Data. The price of the 2.625 percent security maturing in November 2020 rose 15/32, or $4.69 per $1,000 face amount, to 93 13/32. The yield earlier climbed to 3.50 percent, the highest level since May 14. Bank of America Merrill Lynch’s MOVE index, which measures swings in Treasuries based on prices of over-the-counter options maturing in 2 to 30 years, rose yesterday to 118.40, the highest level since October 2009. Consumer prices increased 0.1 percent in November, the Labor Department reported today in Washington. The median forecast of 80 economists in a Bloomberg News survey was for an advance of 0.2 percent. ‘No Serious Sign’ “There’s no serious sign of inflation pressure,” said Andy Cossor, Hong Kong-based chief Asia market strategist at DZ Bank AG, Germany’s fifth-largest lender, before the inflation report was released. China remained the biggest foreign holder of U.S. Treasuries, after its holdings rose by $23.3 billion to $906.8 billion in October, the U.S. Treasury reported. Japan, the second-largest holder, increased its holdings by $12.8 billion to $877.4 billion in October. Treasuries rose earlier after Moody’s Investors Service said it put Spain’s credit rating on review and Portugal’s 500 million euros ($666 million) auction of three-month bills attracted reduced demand. The sale of Portuguese securities due in March drew bids equivalent to 1.9 times the amount offered, compared with a ratio of 2.2 in November, government figures showed. The bills were sold at an average yield of 3.403 percent, up from 1.818 percent at the previous offering. Tax-Cut Deal Treasury notes dropped earlier on speculation U.S. President Barack Obama’s agreement to extend tax cuts will pass in Congress, supporting growth, spurring inflation and prompting investors to reduce holdings of longer-dated securities. Fed officials yesterday kept their plan to buy Treasuries through June under quantitative easing, disappointing some investors by not expanding record stimulus. The central bank retained a commitment to keep its benchmark rate low for an “extended period,” holding the target rate for overnight lending between banks at zero to 0.25 percent, where it has been since December 2008. Treasury 10-year yields may fall back toward 3 percent as technical indicators show the debt has been oversold, according to Canadian Imperial Bank of Commerce. When the yield surged yesterday to 3.49 percent, it crossed the 61.8 percent retracement from the April high of 4 percent and a low of 2.33 percent on Oct. 8, based on a series of numbers known as Fibonacci sequence. “Yields may fall toward 3 percent toward year-end, before possibly retesting the 61.8 percent retracement level to form a double-top,” said Kazuaki Oh’e, the Tokyo-based executive director of fixed income, currencies and distribution at Canada’s fifth-largest lender. --With assistance from Yumi Ikeda in Tokyo. Editors: Dennis Fitzgerald To contact the reporters on this story: Cordell Eddings in New York at ceddings@bloomberg.net; Lukanyo Mnyanda in London at lmnyanda@bloomberg.net To contact the editor responsible for this story: Robert Burgess at bburgess@bloomberg.net

Source