Treasuries Fall as U.S. Begins Record $123 Billion Note Sales

Oct. 26 (Bloomberg) -- Treasuries fell, with 10-year note yields touching their highest level in two months, as the U.S. began to sell a record $123 billion of notes to fund its stimulus program and record deficits.

Government securities declined for a fourth day as the Treasury sold of $7 billion of five-year Treasury Inflation Protected Securities at a yield of 0.769 percent. The offering, which drew higher-than-average demand, will be followed by three auctions of fixed-rate notes this week.

“We are still at relatively low yield levels, which in front of so much supply and an economy that seems to be starting to turn the corner, don’t seem justified,” said Ajay Rajadhyaksha, head of U.S. fixed-income strategy in New York at Barclays Plc, one of the 18 primary dealers required to bid at Treasury auctions.

The yield on the 10-year note increased seven basis points, or 0.07 percentage point, to 3.55 percent at 2:48 p.m. in New York, according to BGCantor Market Data. The yield touched 3.58 percent, the highest level since Aug. 24. The 3.625 percent security maturing in August 2019 fell 18/32, or $5.63 per $1,000 face amount, to 100 19/32.

“The momentum suggests we could move higher in yields,” said David Ader, head of U.S. government bond strategy in Stamford, Connecticut, at CRT Capital Group LLC. “If we break 3.52 percent, then the next projection is 3.76 percent. Resistance is at 3.28 percent.”

The 10-year yield will increase to 3.56 percent by year- end, according to the average forecast of analysts in a Bloomberg survey, with the most recent estimates given the heaviest weightings.

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