March 11 (Bloomberg) -- The risk of losses on U.S. Treasury notes exceeded German bunds for the first time ever amid investor concern the subprime mortgage crisis is sapping government reserves, credit-default swaps prices show.

Contracts on 10-year Treasuries traded at a record 16 basis points earlier today, compared with 15 basis points on German government notes, according to data compiled by BNP Paribas SA. In July, U.S. credit-default swaps were at 1.6 basis points, compared with 2.5 basis points on bunds.

Federal Reserve Chairman Ben S. Bernanke announced plans today to lend as much as $200 billion of Treasury notes in exchange for debt including private mortgage-backed bonds to avert an exodus from the securities that threatens to deepen the housing slump and economic slowdown.

``The U.S. government is not immune from the consequences of the credit crisis,'' said Fabrizio Capanna, BNP's head of high-grade corporate trading in London. ``Support for troubled financial institutions in the U.S. will be perceived as a weakening of U.S. sovereign credit.''

The Fed is trying to ease investor concern that a decline in house valuations and record foreclosures will add to losses for companies including Freddie Mac and Fannie Mae, the two biggest providers of U.S. mortgages. The $4.5 trillion of agency mortgage securities is about the same size as the market for Treasury notes.

Credit-default swaps are used to speculate on the ability of companies or governments to repay their debt and offer a benchmark for pricing securities. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A decline indicates improvement in the perception of credit quality; an increase, the opposite.

Hoarding Treasuries

A basis point on a credit-default swap contract protecting $10 million of debt from default for 10 years is equivalent to $1,000 a year.

The risk of owning U.S. debt is rising as the world's largest economy is expected to slow, balloon the national deficit and likely increase the amount the government needs to borrow.

The U.S. economy's rate of expansion anticipated for all of 2008 is 1.4 percent, the weakest since the recession of 2001, according to the median estimate of economists surveyed by Bloomberg News. Germany's gross domestic product will increase at a 1.6 percent annual rate, according to a separate survey.

Budget Deficit

The Bush administration forecasts a $410 billion budget deficit for this fiscal year ending Sept. 30, approaching the record of $413 billion set in 2004. The budget shortfall will force the Treasury Department to increase its borrowing by 145 percent from $163 billion, according to UBS Securities LLC.

The U.S. current account deficit is expected to be 4.8 percent of GDP in 2008, while Germany is expected to have a 5.5 percent surplus, according to separate surveys.

Investors and securities firms have hoarded Treasuries during the credit crisis because they are considered the safest and most easily traded securities, reducing yields on two-year notes to the lowest since 2003. Yields on Treasuries have been lower than on German bunds since October.

U.S. two-year note yields rose today by the most since March 1996 to 1.77 percent from 1.49 percent on Bernanke's plan.

To contact the reporter on this story: Abigail Moses in London Amoses5@bloomberg.net

Last Updated: March 11, 2008 16:45 EDT