Treasuries fell as the U.S. sold $13 billion of 30-year bonds to lower-than-average demand in the final of three offerings of notes and bonds this week totaling $66 billion.

The securities drew a yield of 3.852 percent, compared with the average forecast of 3.831 percent in a Bloomberg News survey of 6 of the Fed’s 18 primary dealers. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.49, the lowest since February. The average at the last 10 auctions was 2.7.

“It’s a two-pronged assault on the 30-year,” said Kevin Flanagan, a Purchase, New York-based fixed-income strategist for Morgan Stanley Smith Barney. “Another round of quantitative easing and an increase in inflation expectations” have hurt the bond as has the lack of Fed purchases. “The prime beneficiaries up to this point have been in the 5- to 10-year area,” he said.

The yield on the 30-year bond increased six basis points, or 0.06 percentage point, to 3.88 percent at 1:15 p.m. in New York, according to BGCantor Market Data. The 10-year note yield rose six basis points to 2.48 percent.

The auction was the second reopening of the $16 billion 30- year bond sale on Aug. 12. The securities drew yields of 3.954 percent in August and 3.82 percent in September.

Indirect bidders, a class of investors that includes foreign central banks, bought 32.4 percent of the securities today, compared with 36.1 percent of the bonds at the September auction and an average for the past 10 sales of 35.8 percent.

Direct Bidders

Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, purchased 9.1 percent of the bonds, compared with an average of 17.6 percent for the past 10 offerings.

Thirty-year bonds have returned 17.7 percent this year, compared with 9.1 percent for the overall Treasury market as of yesterday, according to Bank of America Merrill Lynch indexes.

Long-bond yields rose on each of the past four trading days on concern a resumption of debt purchases by the Fed as part of its quantitative-easing plan would concentrate on debt maturing in five to 10 years. The yields reached a three-week high of 3.88 percent yesterday.

Treasuries fell yesterday after demand was weaker than average at a sale of 10-year notes that raised $21 billion. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 2.99 versus an average of 3.1 for the past 10 sales. The offering drew a yield of 2.475 percent.

Reinvestment Program

Thirty-year bonds later erased losses after the Fed said it would purchase about $32 billion in U.S. debt over the next month, including securities maturing in 2040, in its program to reinvest proceeds from its holdings of mortgage bonds.

The U.S. auctioned $32 billion of three-year debt on Oct. 12 at a record-low yield of 0.569 percent and $21 billion of 10- year notes yesterday at a yield of 2.474 percent, the lowest since January 2009.

The Treasury can continue to cut auctions of nominal coupons of less than 7 years’ maturity by $1 billion per month until the February quarterly refunding on anticipation that the U.S. budget deficit will narrow, according to primary dealer Goldman Sachs Group Inc. The firm lowered its forecast for the fiscal year 2011 deficit to $1.25 trillion, from $1.3 trillion.

Fed policy makers next meet Nov. 2-3. New York Fed President William Dudley, the Boston Fed’s Eric Rosengren and Chicago’s Charles Evans all advocated more action to boost the economy. Fed Chairman Ben S. Bernanke said Oct. 4 restarting large-scale asset purchases would probably spur growth.

Inflation Data

A government report tomorrow will show U.S. inflation was in check last month, economists said. Consumer prices rose 0.2 percent in September after a 0.3 percent gain the prior month, a Bloomberg News survey forecast.

The spread between yields on 10-year notes and Treasury Inflation Protected Securities, an indication of inflation expectations, touched 2.13 percentage points, the widest since May 19. The five-year average is 2.10 percentage points.

The difference between yields on 10-year Treasuries and the year-over-year consumer price index, known as real yields, was at 1.36 percentage points. It touched a 2010 high of 2.07 percentage points in July and a low of 0.86 percentage point in January.

The difference in yield, or spread, between 10-year and 30- year debt narrowed for the first time in 10 days, decreasing to 1.37 percentage points. The gap widened to a record 1.41 percentage points yesterday as the prospect of Fed easing stoked inflation expectations.