By Wes Goodman Nov. 4 (Bloomberg) -- Treasuries were little changed, with two-year note yields at the lowest in a week, on speculation a report today will show a decline in factory orders and traders bet the Federal Reserve will cut interest rates to revive growth. Fed Bank of Dallas President Richard Fisher said in a Bloomberg Television interview that the economy probably won't expand in 2009. Analysts estimate gross domestic product will contract for a second quarter in the three months to December, increasing demand for the safest assets. A government report this week is forecast to show companies cut jobs for a 10th month. ``Yields will fall because the recession is going to last for a year,'' said Shuhei Mochizuki, an assistant manager in the foreign bond section at Sumitomo Life Insurance Co. in Tokyo, with the equivalent of $30.3 billion in non-Japanese debt. ``Treasuries have liquidity and they're very safe.'' Two-year notes yielded 1.44 percent as of 1:07 p.m. in Tokyo, according to BGCantor Market Data. The 1.5 percent security maturing in October 2010 traded at a price of 100 4/32. Ten-year notes yielded 3.91 percent. Two-year rates will fall to 1.25 percent and 10-year yields will be 3.6 percent by year-end, Mochizuki at Japan's fourth- largest life insurer by assets said. Futures on the Chicago Board of Trade show a 54 percent chance Fed policy makers will reduce the target for overnight bank loans from 1 percent to 0.5 percent at a Dec. 16 meeting. The rest of the bets are for a quarter-point cut. Australian Bonds Australian 10-year bonds rose the most in a week after the central bank cut its benchmark interest rate by three quarters of a percentage point to 5.25 percent, the third reduction in as many months. Ten-year yields declined 10 basis points to 5.30 percent. Orders placed with U.S. factories declined 0.8 percent in September, following a 4.4 percent slide in August, according to the median forecast of economists surveyed by Bloomberg News before the Commerce Department report at 10 a.m. in Washington. Two-year notes climbed by the most since Oct. 15 yesterday as the Institute for Supply Management's U.S. manufacturing index dropped in October to the lowest level since 1982, the Tempe, Arizona-based group reported. ``The credit crisis reached up and grabbed the throat of the global economy and choked off economic growth,'' Fisher said yesterday. Americans Vote Americans vote today to decide if Republican John McCain or Democrat Barack Obama will be the next president, choosing who will inherit the most severe financial crisis since the Great Depression. Two-year notes returned 1.1 percent in October, according to indexes compiled by Merrill Lynch & Co. The Fed cut interest rates twice and investors sought the safest securities as credit markets froze and the Standard & Poor's 500 Index fell almost 17 percent, the most since 1987. General Motors Corp., the largest U.S. automaker, said U.S. sales fell 45 percent in October. Ford Motor Co., the second- biggest, said sales declined 30 percent. Ten-year notes handed investors a loss of 0.8 percent because of concern the U.S. will increase sales of long-term debt to pay for a $700 billion bank-rescue package. The government said yesterday fourth-quarter borrowing needs probably will grow to $550 billion, up from an earlier estimate of $142 billion. Debt Sales The U.S. is scheduled on Nov. 5 to announce the amount of Treasuries it plans to auction. It may sell a net $388 billion of bills, notes and bonds this quarter, up from $178.4 billion in the previous three months and $33.4 billion in the same period of 2007, according to a survey by the Securities Industry and Financial Markets Association released Oct. 31. Yields indicate financial markets are thawing, helping curtail demand for Treasuries. The difference between what banks and the Treasury pay to borrow money for three months, the so-called TED spread, shrank to 2.37 percentage points from 3.87 percentage points a month ago. The narrowing shows banks are becoming more willing to lend. An index of emerging-market sovereign bonds compiled by JPMorgan Chase & Co. yielded 6.10 percentage points more than Treasuries, narrowing from a six-year high of 8.65 percentage points on Oct. 24. ``The flight-to-quality bid for bonds that was associated with a teetering financial system is starting to come undone,'' said Peter Jolly, head of markets research in Sydney at NabCapital, the investment-banking unit of National Australia Bank Ltd., the nation's largest lender. ``There's supply coming as well.'' Ten-year yields will probably hold little changed through year-end, he said. The difference between two- and 10-year yields widened to 2.47 percentage points as shorter maturities outperformed. The result is a widening in the so-called yield curve to the most since 2004. ``People are still clinging to their security blanket and the front end of the Treasury curve,'' said Robert Tipp, chief investment strategist for fixed income in Newark, New Jersey, at Prudential Investment Management, which oversees more than $200 billion of bonds. To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net.

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