New York: Treasuries advanced for the first time in three weeks as weaker-than-forecast economic reports and the threat of credit-rating downgrades for Greece spurred demand for the safety of US government debt.

Yields on 30-year bonds fell the most last week in six months as reports showed sales of new and existing homes unexpectedly tumbled, consumer confidence dropped and fourth-quarter consumer spending grew less than forecast. A report on March 5 is forecast to show that US employers cut 50,000 jobs in February.

"The government did a lot to prop up our economy and get things going, but there just has been no follow-through from consumers or employment," said Justin Hoogendoorn, Chicago-based chief investment strategist at Bank of Montreal's BMO Capital Markets unit. "Add the sovereign concerns and you have a lot of uncertainty."

Markets

The benchmark 10-year note yield fell 16 basis points, the most since the five days ended November 27, to 3.62 per cent, according to BGCantor Market Data. A basis point is 0.01 percentage point. The 3.625 per cent security due February 2020 rose 1 10/32, or $13.13 (Dh48.21) per $1,000 face amount, to 100 2/32. The 30-year bond yield decreased 15 basis points, the most since August 28, to 4.56 per cent.

The yield difference between 2- and 10-year notes, known as the yield curve, was at 2.81 percentage points after narrowing for a second week. It touched a record high of 2.94 percentage points on February 18.

Treasuries advanced for a second month, returning investors 0.12 per cent after a 1.6 per cent gain in January, according to Bank of America Corporation's Merrill Lynch index data.

Standard & Poor's and Moody's Investors Service both said last week that Greece faces potential debt rating downgrades as it struggles to reduce the European Union's biggest budget shortfall.

"The situation in Greece has been a factor for the last few weeks," said Tom Roth, senior Treasury trader in New York at Mitsubishi UFJ Securities. "Any uncertainty will cause people to stay close to home or stay in quality products. Uncertainty helps the Treasury market."

Concern that Greek fiscal problems may spread boosted demand at a $32 billion auction of US seven-year securities on February 25.

The number of bids was 2.98 times the securities offered, the highest since the note was reintroduced in February 2009 after a 16-year hiatus. The sale was the last of four auctions this week totalling a record $126 billion of 2-, 5- and 7-year notes and $8 billion of 30-year inflation-linked bonds.

China holds US bonds

The government now says that China did not lose its place in December as the largest foreign holder of US Treasury debt.

The Treasury Department said that under annual benchmark revisions released Friday, China's holdings of US Treasury securities stood at $894.8 billion (Dh3.28 trillion) at the end of December, keeping it in first place ahead of Japan.

On February 16, the government reported data that showed China had been surpassed by Japan. However, the government said in the new report that those figures did not account for purchases by Chinese investors in such places as Britain.

When those purchases are taken into account, the government said that China's holdings in December grew by $139.4 billion above what was reported on February 16.

That increase put China back into first place as the top foreign holder of US Treasury securities at $894.8 billion followed by Japan, now back in second place, at $768.8 billion.

The revised figures represent the annual revisions Treasury makes based on a more detailed report of the actual foreign holdings of the Treasury debt. That survey revised the figures through June 2009, and those more accurate figures were used to update the monthly reports through December 2009. — AP