Treasuries Drop Second Day Before $35 Billion Five-Year Auction

Treasuries dropped for a second day as the U.S. prepares to sell $35 billion in five-year notes amid speculation the Federal Reserve may reduce its purchases of government securities this year.

Shorter-maturity notes slid as sales of new U.S. homes rose more than forecast in June to the highest level in five years, a sign builders are benefiting from a lack of supply of existing properties. Benchmark 10-year note yields rose earlier to the highest level in a week after gauges of euro-area services and manufacturing beat analyst estimates. The U.S. is selling $99 billion in notes this week.