Aug. 9 (Bloomberg) — Investors should be wary of a steepeningyield curve in the U.S. Treasury market, according to PacificInvestment Management Co.'s Mohamed El-Erian.

While yields on government securities due in eight years andless are anchored by Federal Reserve monetary policy, bond buyersshould be wary of longer-maturity debt, El-Erian, the chiefexecutive officer of the world's largest manager of bond funds,said in a “Bloomberg Surveillance” radio interview with Tom Keeneand Ken Prewitt.

“What we would caution is rather the level of the rates, theshape of the curve,” El-Erian said. “The long end is exposed to alot more risk.”

The difference in yields between two- and 10-year Treasurieswidened to 1.44 percentage points, or 144 basis points, the mostsince May. Investors often demand a bigger yield premium onlonger-maturity debt to guard against the risk that inflation willerode the value of fixed payments from the securities overtime.

U.S. debt extended losses today as a report showed fewerAmericans filed applications for unemployment benefits last week, asign the labor market may keep improving after employment picked upin July. Corporate bonds have outperformed government debt asinvestors sought higher yields after Treasury rates dropped torecords last month.

Yields Rise

The yield on the 30-year bond rose three basis point to2.78 percent at 10:40 a.m. in New York, according to Bloomberg BondTrader prices. Yields on Treasuries maturing in 10 years climbedthree basis points to 1.72 percent, the fifth straight dailyincrease, poised for the longest streak since March.

Treasury yields reflect Fed policy, capital flowing out of theEurope amid the euro area's crisis and “a sluggish economy,”El-Erian said. Gross domestic product in the U.S. is forecast toexpand 2.1 percent this year and in 2013, compared with 1.8 percentin 2011, according to the median estimate of economists surveyed byBloomberg.

“The bond market is trying right now to reflect many things,” hesaid. “All of that tends to anchor the 10 year.”

The U.S. central bank has held interest rates near zero since2008 to stimulate the world's biggest economy. The Fed has alsobought $2.3 trillion of mortgage and Treasury debt from 2008 to2011 in two rounds of so-called quantitative easing, or QE.