March 24 (Bloomberg) -- Treasuries, the euro, stocks and commodities slid as a downgrade of Portugal’s debt and weaker- than-forecast demand in a U.S. bond auction added to concern
governments will struggle to fund swelling deficits.

The yield on the 10-year Treasury note rose to 3.85 percent, the highest since Jan. 8. The euro weakened against 12 of its 16 most-traded peers at 2:15 p.m. in New York and fell to
a 10-month low against the dollar. The MSCI World Index of
stocks in 23 developed nations slid 0.8 percent and the Standard
& Poor’s 500 Index fell 0.5 percent, retreating from an 18-month
high. The Reuters/Jefferies CRB Index of commodities dropped to
a five-week low as oil slid 1.5 percent, copper lost 1.4 percent
and lead tumbled 4 percent.

A record-tying $42 billion sale of five-year debt drew a higher-than-forecast yield and lowest demand since July from a group of investors that includes foreign central banks. France
and Germany are nearing agreement on International Monetary Fund
involvement in any aid package for Greece, according to a
finance ministry official in Berlin, spurring concern the
European Union won’t rescue the nation itself. The Portugal
downgrade heightened concern that more European nations will
struggle to fund swelling deficits.

Greece “is going to default at some point,” and Europe’s failure to answer that challenge will hurt the common currency, UBS Investment Bank’s London-based deputy head of global
economics, Paul Donovan, said in an interview on Bloomberg
Radio. “If Europe can’t solve a small problem like this, how on
earth is it going to solve the larger problem, which is the euro
doesn’t work,” he said.

Economic Data Overshadowed

The S&P 500 fell for the first time in three days after closing at the highest level since September 2008 yesterday. Concern over Portugal and Greece overshadowed a third straight
monthly increase in orders for durable goods, a sign the
manufacturing rebound will keep propelling the U.S. recovery.
European reports showed that the region’s services and
manufacturing grew at the fastest pace since August 2007 and
German business confidence increased.

The euro declined as much as 1.3 percent to $1.3324, the lowest level since May 2009. The Swiss franc erased gains after earlier trading near a record high versus the euro on
speculation the nation’s central bank is becoming less resistant
to currency gains. The dollar strengthened against 15 of 16
major counterparts, led by a 1.9 percent gain against the
Japanese yen.

Copper fell for a second day in New York and lead posted a fifth retreat on the London Metal Exchange as the stronger dollar increased costs for investors holding other currencies.
Gold dropped 1.4 percent to $1,089.65 an ounce. Crude oil slid
1.5 percent to $80.68 a barrel after a government report showed
a bigger-than-forecast increase in U.S. supplies.

Treasuries Drop

The five-year securities sold by the U.S. today yielded 2.605 percent, compared with an average estimate of 2.556 percent in a Bloomberg News survey of 8 of the Federal Reserve’s
18 primary dealers.

The five-year note yield rose as much as 18 basis points, or 0.18 percentage point, the biggest intraday increase since Aug. 3.

The Stoxx Europe 600 Index closed little changed. While most European stock gauges declined, Greece’s ASE Index rose 0.8 percent. Portugal’s PSI-20 Index slumped 1 percent, the most in
a month. Commerzbank AG climbed 2.8 percent in Frankfurt after
Chief Financial Officer Eric Strutz said in an interview that
Germany’s second-largest bank expects to post a pretax profit in
the first quarter.

Five stocks advanced for every four that dropped in the MSCI Asia Pacific Index, which fell 0.2 percent. Samsung Electronics Co., the world’s largest memory-chip maker, gained
1.2 percent in Seoul after chip prices jumped. Nintendo Co.
surged 8.7 percent in Osaka after saying it will sell a 3-D
version of its DS handheld player.

The MSCI Emerging Markets Index was little changed. Brazil’s Bovespa stock index fluctuated between gains and losses as Petroleo Brasileiro SA rallied, offsetting a drop in banks on
concern the global recovery will be slowed by nations struggling
with deficits.