Treasuries Gain on Durable-Goods Drop as Economy Shrinks

Treasuries rose, sending yields on benchmark 10-year notes to a three-week low, as reports showed the U.S. economy contracted more than forecast last quarter and demand for durable goods decreased.

Yields dropped for a second day as the U.S sold $35 billion in five-year notes at higher-than-average demand. The difference between yields on two- and 10-year notes narrowed to almost the least in a year, suggesting investors are questioning the pace of potential Federal Reserve interest-rate increases next year. Treasuries rose earlier as Middle East turmoil stoked refuge demand.