Treasuries Fall as France, Germany Seek EU Treaty Changes on Debt Limits

By Wes Goodman - Dec 6, 2011 7:43 AM GMT+0700

Treasuries fell for a second day after Germany and France said they want new European Union rules on borrowing limits and penalties for deficit violators to curb the region’s debt crisis.

“Treasury yields should be higher,” said Peter Jolly, the Sydney-based head of market research at National Australia Bank Ltd., the nation’s largest lender as measured by assets. “Close integration helps keep the euro together. It reduces the bid for safe-haven assets.”

Benchmark 10-year rates increased two basis points to 2.06 percent as of 9:22 a.m. in Tokyo, according to Bloomberg Bond Trader prices. The 2 percent note due in November 2021 fell 5/32, or $1.56 per $1,000 face amount, to, 99 14/32.

With the fate of the currency shared by the 17 euro countries at risk, German Chancellor Angela Merkel and French President Nicolas Sarkozy yesterday presented a common platform for a Dec. 8-9 EU summit in Brussels that aims to halt the crisis now in its third year. Among the Franco-German measures were plans to fast-track the permanent rescue fund to 2012, one year earlier than originally planned.

To contact the reporters on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net