Treasuries Fall Before $16 Billion 30-Year Auction, Pare Losses on Stocks

Treasuries snapped a three-day surge amid speculation investors will demand higher yields at a sale of 30-year bonds today and as investors bet the U.S. economy isn’t slowing enough to justify keeping yields at a record low.

Treasuries pared a bigger drop earlier as U.S. stock futures reversed earlier gains, indicating the Standard & Poor’s 500 Index probably fell for the fourth day in five, supporting demand for the safest assets. Ten-year yields rose after the real yield, which accounts for inflation, dropped to negative 1.45 percent yesterday, approaching the lowest since 2008.

“Treasuries are still a safe haven because it is such a deep and liquid market,” said Marc Ostwald, a fixed-income strategist at Monument Securities Ltd. in London. “There’s a limit to the downside here. There will probably be a considerable concession made ahead of the auction.”

Ten-year yields rose two basis points to 2.16 percent at 8:01 a.m. in New York, according to Bloomberg Bond Trader prices. The 2.125 percent note maturing in August 2021 fell 4/32, or $1.25 per $1,000 face amount, to 99 22/32. Earlier yields climbed as much as eight basis points.

The rate fell to a record low 2.0346 percent on Aug. 9. The figure translated into negative 1.57 percent after subtracting inflation, the lowest real yield since September 2008.

Thirty-year yields rose four basis points to 3.56 percent, while two-year yields fell one basis point at 0.17 percent.

U.S. equity-index futures fell, erasing earlier gains and signaling the Standard & Poor’s 500 Index may sink to an 11- month low.

Treasuries surged this month, pushing 10-year yields down more than 50 basis points since the start of August, as the European sovereign debt crisis and a potential double-dip recession in the U.S. sent the S&P 500 Index down 13 percent.

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.