Nov. 12 (Bloomberg) -- Treasuries gained as stocks fell and the U.S. completed this week’s three note and bond offerings with a record $16 billion sale of debt maturing in 30 years.

Government securities rose as the dollar advanced against most of its major counterparts. The difference between 2- and 30-year yields touched 3.60 percentage points, the most since June, amid expectations the Treasury will increase sales of longer-term securities. Thirty-year bonds initially declined after the auction as the debt drew the weakest demand since May.

“We’ve seen some buying after the auction from people who were a little nervous at auction time,” said Carl Lantz, an interest-rate strategist in New York at Credit Suisse AG, one of the Federal Reserve’s 18 primary dealers, which are required to bid at Treasury auctions. “These yields seem relatively attractive for people who believe in the new normal and slower growth.”

The 10-year note yield fell five basis points, or 0.05 percentage point, to 3.44 percent at 4:21 p.m. in New York, according to BGCantor Market Data. The 3.375 percent security maturing in November 2019 rose 13/32, or $4.06 per $1,000 face amount, to 99 14/32.

The existing 30-year bond yield fell two basis points to 4.40 percent. The debt sold today drew a yield of 4.469 percent, higher than the average forecast of 4.424 percent in a Bloomberg News survey of five primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.26, the least since May and below an average of 2.39 at the last 10 auctions.

‘Psychology of Supply’

“The overall trend is toward higher yields but at certain points the market has a tendency to bounce,” said John Spinello, chief technical strategist in New York at primary dealer Jefferies Group Inc. “The psychology of supply being behind us will protect the market for a while.”

The Standard & Poor’s 500 Index fell 1 percent after yesterday closing at a 13-month high.

Treasury Secretary Timothy Geithner is seeking to lock in near record-low borrowing costs by lengthening the average due date of the Treasury’s outstanding debt. Department officials on Nov. 4 announced a long-term target of six to seven years for the average maturity of government debt. The average maturity is currently about 53 months, according to Treasury data, below the historical average of about five years.

The U.S. sold $81 billion of debt this week, including $40 billion in three-year notes on Nov. 9 and $25 billion of 10-year debt on Nov. 10, both records, as President Barack Obama borrows unprecedented amounts to fund his stimulus programs. U.S. marketable debt stands at $6.95 trillion and reached a record $7.01 trillion in September.

$2.38 Trillion

Sales of coupon-bearing Treasuries will increase to $2.38 trillion in the fiscal year that began Oct. 1, from $1.81 trillion in the prior 12 months, primary dealer Goldman Sachs Group Inc., said in a report on Oct. 20.

The amounts are making some investors say today’s gains won’t last.

“There’s no end to the Treasury sales in sight,” said Tsutomu Komiya, an investor in Tokyo at Daiwa Asset Management Co., which oversees $77 billion as part of Japan’s second- largest brokerage. “Supply will send bond yields higher.”

Ten-year yields will rise to 4 percent by the end of 2010, he said. A Bloomberg survey of banks and securities companies projects the figure will be 4.22 percent, with the most recent forecasts given the heaviest weightings.

The government last auctioned 30-year securities on Oct. 8, a $12 billion sale that drew a high yield of 4.009 percent. That auction attracted bids for 2.37 times the amount on offer, compared with 2.92 at the September auction.

Consumer Prices

The previous record for a sale of 30-year securities was the $15 billion offering in August. The so-called long bond was reintroduced in February 2006 after the government suspended it in 2001 following four years of federal budget surpluses.

The difference between rates on 10-year notes and Treasury Inflation Protected Securities, which reflects the outlook among traders for consumer prices, was 2.17 percentage points, below the five-year average of 2.18 percentage points.

Treasuries have returned 1.8 percent since July 1, after posting the worst first half of a year since Merrill Lynch & Co.’s Treasury Master index began tracking returns in 1978. The 30-year bond has returned 0.405 percent since July 1.

The increase in long-term yields means bonds are lagging behind shorter securities.

Two-year notes returned 1.4 percent in 2009, while 10-year securities handed investors a 7.4 percent loss and 30-year bonds tumbled almost 24 percent, based on indexes compiled by Merrill Lynch.

To contact the reporters on this story: Susanne Walker in New York at swalker33@bloomberg.net.

Last Updated: November 12, 2009 16:24 EST