(Bloomberg News) Treasuries fell, erasing a weekly gain, as President Barack Obama's call on Congress to pass a $447 billion jobs plan reduced demand for the safest assets.

Longer-maturity bonds led losses as Moody's Corp. forecast that passage of the entire package would add 2 percentage points to U.S. economic growth next year. Earlier reports had indicated Obama would propose more than $300 billion in stimulus. The Treasury is scheduled to sell $66 billion in three-, 10- and 30- year debt next week.

"The market seems to be registering that this will lead to growth and job creation of some sort, and that's what pushes yields up," said Stephen Lewis, chief economist at Monument Securities Ltd. in London. "But the rise in yields could be temporary because we don't know if this will come through or whether the measures to finance it will be approved."

The benchmark 10-year yield rose two basis points, or 0.02 percentage point, to 2 percent at 8:53 a.m. in London, according to Bloomberg Bond Trader prices. The 2.125 percent security due in August 2021 fell 1/8, or $1.25 per $1,000 face amount, to 101 5/32. The yield slid to a record 1.9066 percent on Sept. 6.

Thirty-yield rates climbed two basis points to 3.33 percent. The difference in yield between two- and 10-year notes widened two basis points to 181 basis points as investors bet the President's job package will boost growth.

The plan includes infrastructure spending, subsidies to local governments to stem teacher layoffs and cutting in half payroll taxes paid by workers and small-business owners. Tax cuts account for more than half the plan's dollar value.

Fiscal Boost

Mark Zandi, chief economist at Moody's Analytics Inc. in West Chester, Pennsylvania, who was briefed on the plan before Obama's speech, said the fiscal boost from the package next year would be larger than in the first year of the 2009 economic stimulus. It would bring down the unemployment rate by 1 percentage point compared with current policy, under which a temporary payroll tax cut and extended unemployment benefits both expire Dec. 31.

The package "may be a little negative for Treasuries," said Hiromasa Nakamura, a senior investor in Tokyo at Mizuho Asset Management Co., which oversees the equivalent of $39 billion and is a unit of Japan's second-largest bank by assets. "U.S. yields may pick up a little bit, but in the medium term, I forecast yields will decline further."

Fed Meeting

Treasuries gained yesterday as Federal Reserve Chairman Ben S. Bernanke said policy makers will discuss the tools they may need to use to boost the recovery at their meeting this month. San Francisco Fed President John C. Williams will speak today. Fed officials gather for a two-day meeting starting Sept. 20.

Policy makers are prepared to use the tools they have "as appropriate to promote a stronger economic recovery in the context of price stability," Bernanke said in a speech to economists yesterday in Minneapolis. He said in previous remarks the options include lengthening the average duration of securities in the Fed's $1.65 trillion Treasury portfolio and buying more government bonds.

"Treasuries won't sell off purely because people are not buying Treasuries for the capital gains that they expect, it's more a matter of safety, a flight to quality," said Kumar Palghat, a managing director who helps oversee about A$4.1 billion at Kapstream Capital Pty in Sydney. "Risk assets, I think, will go down."

TED Spread

The TED spread, or the difference between what lenders and the U.S. government pay to borrow for three months, widened for a fourth day yesterday to 32.7 basis points after touching 32.8 on Aug. 26, the most since July 2010.

The Stoxx Europe 600 Index fell 0.3 percent and the MSCI Asia Pacific index dropped 0.5 percent.

The spread between yields on 10-year Treasuries and similar-maturity inflation-linked debt, a gauge of expectations for inflation known as the break-even rate, was at 2.03 percentage points today after shrinking to 1.94 percentage points on Sept. 6, the narrowest since October 2010.

The cost of living in the U.S. grew at a slower pace in August, a Labor Department report is predicted to show Sept. 15.

The consumer-price index increased 0.2 percent from July, when it gained 0.5 percent, according to the median forecast of economists surveyed by Bloomberg News. The so-called core gauge, which excludes energy and food costs, rose 0.2 percent, pushing the advance over the past year to 1.9 percent, the surveys show.