Treasuries fell & pushing yields to 10 years to a maximum of six months

Treasuries fell, pushing yields to 10 years to a maximum of six months, on speculation reports this week will add to the signs of the recovery is sustainable and that the Federal Reserve purchases of assets will increase inflation.

The difference between two and 10 years of performance was extended to the most since May as forecasters raised their estimates for economic growth in the agreement of the speculation of President Barack Obama to extend the tax cuts will boost the expansion of the nation. Treasury bonds to ten years, which fell last week by the most since August 2009, also fell as stocks rallied after China refrained from raising interest rates, eroding demand for assets safer.

"The economy is certainly one reason why the yields are rising, and there are concerns about inflation today as the Federal Reserve is pressing forward and actually print money," said Glenn Marci, strategist bond DZ Bank AG in Frankfurt. "In a 2011 perspective, we believe that yields will go higher still a little bit."

The yield on the benchmark 10-year-old won five basis points to 3.38 percent as of 8:53 am in London, according to BGCantor Market Data. The guarantee of 2,625 percent in November 2020 fell 14/32, or $ 4.38 per $ 1,000 face amount, to 93 22/32. Past performance rose to 3.38 percent, the highest since June 3.

Two-year yields rose three basis points to 0.68 percent, the most since June 23. The difference between the two types of 10 years was 2.67 percentage points, after reaching the most since May 14.

Retail sales

Retail sales rose for the fifth consecutive month in November, the Americans began their holiday shopping, according to a survey before Commerce Department report tomorrow. Sales rose 0.6 percent after a gain of 1.2 percent in October, the survey showed.

figures from the Fed on 15 December may show production at factories, mines and utilities rose 0.3 percent in November after stagnating in October, economists projected. The New York Fed Empire manufacturing index of the state on the same day, and overall economic size of the Philadelphia Fed on December 16 may indicate factories continued to expand this month.

Treasury bonds fell last week, pushing 10-year yields by 31 basis points, after Obama agreed on 6 December to a two-year extension of current tax rates in exchange for another 13 months of unemployment benefits for long-term unemployed and cut the payroll tax by $ 120 million a year.

Pacific Investment Management Co., which manages the largest bond fund, raised its forecast for U.S. growth in 2011, while regulators pump "large amount" of economic stimulus, Director General, Mohamed El-Erian said on 9 December.

U.S. Gross domestic product expanded 2.55 percent in 2011, compared with growth of 2.5 percent estimated last month.

Shares Gain

Treasuries also fell the MSCI Asia Pacific stocks rose by 0.4 percent and the Stoxx Europe 600 index advanced 0.3 percent. China's central bank last week increased the requirements of the lenders' reserve ratio instead of interest rates increasing.

Those responsible for the central bank's policy meeting tomorrow may be a sign that they are open to encourage purchases of debt beyond the $ 600 billion already announced to stimulate job growth and prevent deflation.

Buy more government bonds is "certainly possible", said the Fed chairman, Ben S. Bernanke, in an interview broadcast on CBS Corp. s "60 Minutes" program aired on December 5, referring to the Fed's plan of quantitative easing "It depends on the effectiveness of the program" and the outlook for inflation and the economy said.

To sustain growth can be difficult without an improvement in the unemployment rate, which rose to a seven-month high of 9.8 percent in November.

Consumer prices

Consumer spending excluding food prices and fuel prices rose 0.6 percent in November from a year earlier, matching October increase was the smallest annual increase on record, according to a survey before the government's report of 15 December.

"Bernanke is obviously going to support what they are doing now with the Queen Elizabeth 2 and reiterate its recent public comments," said Masters of Skye, rates strategist at Royal Bank of Scotland Group Plc in Sydney. "We must begin to see some soft data and could see the market trade to 3 percent. We CPI later this week may be more important."

The Fed will buy about $ 105 billion in Treasury bonds over the next month, the New York Fed said in a Dec. 10 schedule posted on its website. Today the Central Bank buys $ 7 billion to 9 billion dollars of debt maturing in June 2016 to November 2017, according to its website.

Financing Costs

At a time when yields on U.S. bonds are increasing the amount the government pays to service its record deficit is the lowest since 2005, compared with the size of the economy.

While interest costs rose 8 percent to 414 billion U.S. dollars in the fiscal year ended September 30, 383.4 billion U.S. dollars in 2009, fell to 2.7 percent of gross domestic product 3 1 percent, data from the U.S. Treasury Department shown. That is the lowest in five years, when he was the same percentage, and below 3.6 percent in 2001, when the U.S. had passed a budget surplus.

"It's a turning point when the cost of interest on government debt starts to rise because the amount of the debt is so high," said Phillip Swagel, assistant secretary for economic policy at the Treasury in 2007 and 2008 now a professor at Georgetown University in Washington. "Prices are still quite low. But at some point the costs of growing interest is going to be forcing more action in this matter."