Treasuries advance before Fed meets on bets growth will suffer

Treasuries rose for a second week as investors speculated that efforts to cut the Federal budget deficit may damp economic growth and awaited a policy statement next week from the Federal Reserve. Ten-year note yields fell to the lowest level in a month even as Standard & Poor's put the U.S. government on notice that it risks losing its AAA credit rating. Gains were tempered by advances in stocks. The U.S. will sell $99 billion in notes in the coming week, and the Federal Open Market Committee opens its two-day meeting on April 26. "You are looking at an economy that's just getting off low levels," said David Coard, head of fixed-income trading in New York at Williams Capital Group, a brokerage for institutional investors. "The market is looking for guidance from the FOMC. We're looking for clues as to when the Fed may possibly begin to change course with respect to monetary policy." Two-year note yields dropped three basis points, or 0.03 percentage point, to 0.66 percent in New York, from 0.69 percent on April 15, according to Bloomberg Bond Trader prices. The 0.75 percent security due in March 2013 rose 732, or $2.19 per $1,000 face amount, to 100 632. Ten-year note yields fell one basis point to 3.40 percent, from 3.41 percent on April 15. Treasuries were headed for their first monthly gain since January, a 0.54 percent return, according to the Bank of America Merrill Lynch Treasury Master index. Volume declined in a shortened week. Treasuries trading closed at 2 p.m. in New York on April 21 and were shut April 22 for the Good Friday holiday under a Securities Industry and Financial Markets Association recommendation. About $980 billion in U.S. debt changed hands this past week, compared with $1.5 trillion in the five days ended April 15, according to Icap Plc, the world's largest interdealer broker. Fed policy makers will leave the target rate for overnight lending between banks unchanged in the coming week at zero to 0.25 percent, where it's been since December 2008, according to all 80 economists in a Bloomberg survey. - Bloomberg