US Treasuries drop before Two Year Auction

Treasuries declined, with yields rising from record lows, before the government auctions $35 billion in two-year notes in the first of three auctions this week totaling $99 billion.

Ten-year yields increased from almost a record low amid speculation Europe’s financial crisis is spreading to the region’s strongest nations. The securities outperformed equivalent German bunds, with the difference in yield between them the least in two weeks, after Moody’s Investors Service cut the Aaa-rated nation’s outlook yesterday, citing “rising uncertainty” over the region’s debt crisis. The U.S. Treasury plans to sell five-year notes tomorrow and seven-year debt the next day.

The Treasury Department is selling $35 billion of five-year debt tomorrow and $29 billion of seven-year securities in two days.

Demand for Treasuries drove yields on U.S. five-, 10- and 30-year debt to record lows yesterday.

U.S. government securities returned 1.3 percent this month through yesterday, including reinvested interest, according to Bank of America Merrill Lynch indexes. German debt returned 2.5 percent, the indexes showed, while the MSCI All-Country World Index of stocks dropped 2 percent in the period on a similar total return basis.

via Businessweek

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