By Bo Nielsen and Wes Goodman Oct. 24 (Bloomberg) -- Treasuries rose, sending the yield on the 30-year bond to the lowest since regular issuance of the securities began in 1977 as spreading financial turmoil wiped more than $10 trillion off stock-markets worldwide this month. U.S. notes rallied on speculation the global slowdown will deepen. The U.K. economy shrank more than forecast, a report showed today, and Belarus, Ukraine, Hungary and Iceland joined Pakistan in requesting at least $20 billion of loans from the International Monetary Fund. U.S. government securities returned 1.6 percent in October, the most since January, according to Merrill Lynch & Co.'s U.S. Treasury Master index, as tumbling stocks spurred demand for the safest assets. ``The global recession theme is growing all the time,'' said Sean Maloney, a debt strategist in London at Nomura International Plc. ``We're still in an environment were people expect the Fed's rates to go down.'' The yield on the 4 1/2 percent bond due in May 2038 fell 13 basis points to 3.93 percent at 7:25 a.m. in New York, according to BGCantor Market Data. The price advanced to 2 10/32, or $23.13 per $1,000 face value, to 110. The yield dropped as low as 3.8676 percent. Ten-year yields declined 17 basis points to 3.51 percent, and have fallen 43 basis points this week, the most since December 1987, on speculation government and central bank efforts to revive lending won't avert a global slowdown. ``Bonds are the instrument, par excellence, to profit from the crisis,'' Societe Generale SA said in a report. Paulson Announcement Treasury Secretary Henry Paulson is preparing to take stakes in regional U.S. banks to halt the freeze of credit to businesses and households, according to a person briefed on the matter. The announcement may come as soon as today, the person said on condition of anonymity. This year's credit-market meltdown prompted Fed officials to make an emergency reduction in rates on Oct. 8, and they will cut again when they meet on Oct. 29, futures contracts indicate. The MSCI Asia Pacific Index of regional shares fell as much as 6.2 percent to its lowest level since 2003. Trading in futures on the Standard & Poor's 500 Index and the Dow Jones Industrial Average was limited after declines in contracts of more than 6 percent triggered a so-called limit down restriction. ``The fires are spreading around the globe,'' Peter Mueller, a fixed-income strategist in Frankfurt at Commerzbank AG, Germany's second-largest bank by assets, wrote in a note today. ``The flight to quality should therefore continue to give massive support to bunds and U.S. Treasuries as this week draws to a close.'' Yen, Pound Futures on the Chicago Board of Trade show a 100 percent chance policy makers will lower their target for overnight bank loans, now 1.5 percent, by a half-percentage point, up from 38 percent odds a week ago. The rest of the bets are for a three- quarter point reduction. The yen climbed to a 13-year high against the dollar as the risk of a global recession prompted investors to slash carry trades, in which they fund purchases of higher-yielding assets with the Japanese currency. The British pound had its biggest decline in at least 37 years after the Office for National Statistics in London said the economy contracted 0.2 percent in the third quarter, more than the 0.5 percent forecast by analysts in a Bloomberg survey. ``There's uncertainty and anxiety,'' said Hiroyuki Bando, chief manager for fixed income, equities and currencies in Tokyo at Mitsubishi UFJ Trust & Banking Corp., part of Japan's biggest bank. ``That's supportive for Treasuries.'' Libor-OIS The difference between the rate banks charge for three- month dollar loans relative to the overnight indexed swap rate, the so-called Libor-OIS spread, widened to 2.62 percentage points from 2.54 percentage points yesterday. The spread has narrowed from 3.66 percentage points on Oct. 10. Paul McCulley, an investor at Pacific Investment Management Co., home to the world's biggest bond fund, said the Libor-OIS spread may be the best way to measure improvement as the Fed expands programs to unfreeze credit markets. ``It's still telling you that the global financial system is a patient in the ICU and the doctor's still got work to do,'' he said yesterday in a Bloomberg Television interview from Newport Beach, California. Borrowing costs for developing nations approached a six- year high after Standard & Poor's yesterday lowered Russia's long-term sovereign credit rating outlook. An index of emerging-market bonds compiled by JPMorgan Chase & Co. yielded 8.57 percentage points more than Treasuries, near the most since November 2002. ``The financial crisis is now morphing ever more clearly into an economic one,'' Ciaran O'Hagan, a fixed-income strategist in Paris at Societe Generale, said in a report yesterday. ``That leaves spread markets still going in only one direction -- south.'' To contact the reporters on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net,

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