Treasury 10-year note yields fell to the lowest this year as falling home prices, reduced consumer confidence and a weaker industrial reading added to concern the U.S. economy is slowing.

Longer-term U.S. debt erased earlier declines sustained on optimism that euro-region policy makers will provide further support for Greece.

Thirty-year bond yields fell as the Federal Reserve purchased $1.9 billion of Treasurys maturing from August 2029 to May 2040 as part of its $600 billion plan to boost the economy.

“Economic releases have all been disappointing and that’s caused Treasurys to recover and to rally,” said Christopher Bury, co-head of fixed-income rates at Jefferies & Co. in New York, one of the 20 primary dealers that trade with the Fed. “When the data is consistently weaker than expected and there’s no one else to sell, and the Fed still has more buying to do, then yields get pressured lower.”

Treasury 10-year yields fell two basis points to 3.05 percent at 12:02 p.m. in New York, according to Bloomberg Bond Trader prices. The 3.125 percent note due in May 2021 rose 6/32, or $1.88 per $1,000 face amount, to 100 20/32. The yield touched 3.0498 percent, matching the lowest level this year.

Thirty-year bond yields fell three basis points to 4.22 percent. On May 18 it touched 4.2 percent, the least since Dec. 1.

Debt Returns

U.S. government securities returned 1.46 percent in May after gaining 1.15 percent in April, Bank of America Merrill Lynch data show. The two-month advance is the most since they rallied 2.74 percent in July and August.

The gains in Treasury returns come as traders curb bets for an increase in the Fed’s rate, with futures contracts indicating that the odds for a rise in borrowing costs by March have fallen to 28 percent from 44 percent a month ago.

U.S. 10-year yields climbed earlier after Jean-Claude Juncker, Luxembourg’s prime minister and head of the euro-area finance ministers’ group, said yesterday officials had ruled out a “total restructuring” of Greek debt and “will try to solve the Greek problem by the end of June.”

News of a new rescue package for Greece came after yields on the nation’s 10-year debt surged to more than 17 percent last week, more than twice the level that prevailed at the time of last year’s 110 billion-euro ($158 billion) bailout from the European Union and International Monetary Fund.

Greek Update

Additional aid will enable Greece to plug its financing gap and delay a return to the bond market, alleviating concern caused by Juncker’s May 26 statement that the IMF could withhold its share of the bailout unless it was given guarantees on how Greece would meet its funding needs over the next 12 months.

“There is the possibility that they could come to a resolution that doesn’t involve a default,” said Anthony Cronin, a Treasury trader at Societe Generale in New York, a primary dealer. “That’s taken away some of the flight to quality out of the market.”

The largest bond dealers are finding fewer Treasurys to sell to the Federal Reserve as its $600 billion purchase program nears an end, a signal of rising demand even as the largest buyer steps away.

The two-week moving average of bond dealers’ submissions for sales to the Fed has fallen 37 percent to $17 billion a day from the $27.3 billion peak in November, according to data compiled by Bloomberg. Price swings have diminished to levels last seen before the financial crisis began in 2007, helping bonds outperform stocks this month by the most since July.

Market Demand

Demand for government debt is increasing even as the central bank prepares to conclude its purchases, the size of the market has doubled to $9.1 trillion and Republicans in Congress spar with President Barack Obama over the nation’s debt ceiling. By offering fewer bonds to the Fed, dealers are signaling any rise in yields after the end of the second round of so-called quantitative easing will be limited and that Obama faces no impediment to funding the $1.5 trillion budget deficit.

“The Fed’s QE2 program finally appears to be exhausting the supply of Treasurys that can easily come out of investor portfolios, a bullish sign for the market,” said Terry Belton, global head of fixed-income and foreign-exchange research at JPMorgan Chase & Co., a primary dealer.

Longer-term Treasurys rose after confidence among U.S. consumers unexpectedly declined in May to a six-month low as Americans’ outlook for business conditions and the labor market soured.

Economic Indicators

The Conference Board’s index dropped to 60.8 from a revised 66 reading in April, figures from the New York-based private research group showed today. The median forecast of economists surveyed by Bloomberg News called for a rise to 66.6.

The Institute for Supply Management-Chicago Inc. said its May business barometer dropped to 56.6 from 67.6 in April. Readings higher than 50 signal expansion and this month’s gauge is the lowest since November 2009. Economists watch the Chicago index and other regional manufacturing reports for an early reading on the national outlook.

The S&P/Case-Shiller index of property values in 20 cities fell 3.6 percent from March 2010, the biggest year-over-year decline since November 2009, the group said today in New York. At 138.16, the gauge was the weakest since March 2003.

“Every single economic statistic is weaker than expected,” said Ray Remy, head of fixed income in New York at primary dealer Daiwa Capital Markets America Inc. “It’s ongoing and pushing Treasury prices higher.”