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By Bloomberg

Treasuries fell, extending a decline from last week, on expectations the Federal Reserve will determine the economy is strong enough for it to end its bond- buying program at a two-day meeting starting tomorrow.

U.S. gross domestic product expanded at a 3 percent annual rate in the third quarter, according to a Bloomberg News survey of analysts before the report Oct. 30, with the economy set to outperform Europe and Japan this year. The Treasury Department is scheduled to auction $108 billion of notes this week.

"The U.S. economy is the strongest if you compare it with the G-7," said Hiroki Shimazu, the senior market economist in Tokyo at SMBC Nikko Securities Inc., a unit of Japan's second- largest publicly traded bank. "The higher growth rate will be a bad environment for Treasuries."

The benchmark 10-year yield rose one basis point to 2.28 percent as of 6:42 a.m. in London, according to Bloomberg Bond Trader prices. The 2.375 percent note due in August 2024 declined 2/32, or 63 cents per $1,000 face amount, to 100 27/32.

The yield will reach 3 percent by year-end, Shimazu said. Bloomberg's U.S. Treasury Bond Index slid 0.3 percent last week.

Japan's 10-year yield was unchanged at 0.47 percent. Australia's climbed two basis points to 3.30 percent. A basis point is 0.01 percentage point.

U.S. growth of 3 percent would be down from 4.6 percent in the second quarter. For 2014, economic expansion will be 2.2 percent in the U.S., 1 percent in Japan and 0.8 percent in Europe, based on Bloomberg News surveys of economists.

Service Industries

A private report today will show growth in U.S. service industries slowed in October, according to the surveys.

The U.S. will sell $29 billion of two-year notes tomorrow, $35 billion of five-year debt the next day and $29 billion of seven-year securities on Oct. 30. It also plans to auction $15 billion of two-year floating-rate debt on Oct. 29.

The Fed said in September it will end its bond-purchase program at its meeting this week as long as the U.S. economy keeps improving.

Policy makers will probably raise their target for overnight bank lending from near zero in the third quarter of next year, said Wontark Doh, head of overseas fixed-income investment in Seoul at Samsung Asset Management, which manages $122 billion.

Ten-year yields may rise to 2.4 percent following this week's meeting, he said.
Samsung prefers U.S. corporate bonds over Treasuries because America's economy will outperform its peers, he said.

There's about a 77 percent chance the Fed will lift its target at least 0.5 percent by January 2016 futures data compiled by Bloomberg show.

U.S. 10-year yields will climb to 2.67 percent by Dec. 31, based on a Bloomberg survey of banks and securities companies, with the most recent forecasts given the heaviest weightings.