Treasuries Slip as European Leaders Work to Resolve Debt Crisis

By Lukanyo Mnyanda and Wes Goodman - Nov 29, 2011 3:53 PM GMT+0700

Treasury 10-year notes fell for a third day, the longest run of declines in five weeks, amid speculation that European leaders are stepping up efforts to contain the region’s debt crisis.

The yield climbed above 2 percent for the second straight day as finance ministers from the 17-nation currency union meet in Brussels today to discuss how to strengthen the European Financial Stability Facility rescue fund. It’s “absurd” to rank the U.S. among top-rated borrowers, investor Jim Rogers said after Fitch Ratings yesterday gave the nation’s debt a negative outlook, while affirming its AAA grade.

There “appears to be more determined effort to address some of the core issues in Europe,” said Tony Morriss, head of interest-rate research in Sydney at Australia & New Zealand Banking Group Ltd. “That would start to undermine longer-term, safe-haven support in some of the bond markets.”

The 10-year yield rose one basis point to 1.98 percent at 8:42 a.m. London time, according to Bloomberg Bond Trader prices. The 2 percent security due in November 2021 slipped 2/32, or $0.63 per $1,000 face amount, to 100 5/32, set for the longest run of declines since the three days ended Oct. 24.

European leaders are working toward a Dec. 9 summit meeting to regain investor confidence. President Barack Obama renewed pressure on the region’s officials to prevent a dismantling of the single currency.

Agreeing on a sufficient response to Europe’s problems is of “huge importance” to the U.S., Obama told reporters after meeting yesterday with European Union President Herman Van Rompuy and European Commission President José Barroso.

Demand for the relative safety of U.S. securities resulted in a 1.2 percent gain this month as of yesterday, based on Bank of America Merrill Lynch data. German bunds fell 0.7 percent and Japanese bonds were little changed, the indexes show.

To contact the reporter on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net; Wes Goodman in Singapore at vwgoodman@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net