Economic Growth

Yields on the benchmark 10-year note rose 0.11 percentage point to 3 percent last week, Bloomberg Bond Trader prices show. The 2.75 percent note due November 2023 fell 30/32, or $9.31 per $1,000 face amount, to 97 7/8.

Rather than a referendum on America’s credit quality, the bond losses reflect greater confidence in the U.S.-led global recovery and suggest the appeal of Treasuries will diminish further as the Fed scales back, according to Christopher Sullivan, who oversees $2.2 billion as chief investment officer at United Nations Federal Credit Union.

The economies of the U.S., Europe and Japan are all forecast to expand next year, the first time that’s happened since 2010, according to economists surveyed by Bloomberg. The U.S. economy will probably grow 2.6 percent in 2014 and accelerate 3 percent the following year, which would be the fastest in a decade, data compiled by Bloomberg show.

“Global markets are undergoing healing and repair,” Sullivan said in a Dec. 17 telephone interview from New York. “The risk of global contagion emanating from a collapse of one kind or another, it’s not zero but it’s receded quite a bit.”

Dollar Strength

Sullivan said the firm holds a smaller percentage of Treasurys than their allocation in benchmark indexes.

U.S. government debt is suffering the worst returns versus stocks on record this year. With Standard & Poor’s 500 Index gaining 29.1 percent and Treasuries posting a decline, the 32.5 percentage point gap is the most since at least 1978, data compiled by Bank of America and Bloomberg show.

The strength of the dollar may help to bolster demand from overseas debt investors, who own about 50 percent of the U.S. government’s debt obligations. The dollar has gained this year versus 11 of 16 major currencies tracked by Bloomberg, including the Japanese yen, the Norwegian krone, the Brazilian real and the Canadian dollar.

The greenback is forecast to appreciate against the nine other Group-of-10 currencies next year, extending the best annual gain since 2008. The dollar will appreciate 3.6 percent versus the yen and 7.4 percent against the euro in 2014, according to data compiled by Bloomberg.