By Anchalee Worrachate and Wes Goodman Nov. 4 (Bloomberg) -- U.S. Treasuries fell as gains in stock markets curbed demand for the safest assets and before the Treasury announces debt-sale plans tomorrow that may show its borrowing needs soared. The spread between two- and 10-year-note yields narrowed amid speculation the Treasury is planning to more than double sales of securities in the fourth quarter. Stocks in Europe and Asia advanced as earnings results dulled concern about slowing economic growth and money-market interest rates eased. ``Yields will struggle to fall because we will get a quarterly refunding announcement tomorrow,'' said David Keeble, London-based head of fixed-income strategy at Calyon, the investment-banking unit of Credit Agricole SA. ``The government is going to sell a lot of bonds into a market that doesn't want them. I'm negative on Treasuries.'' The yield on the two-year note rose 4 basis points to 1.48 percent as of 7:10 a.m. in New York, according to BGCantor Market Data. The 1.5 percent security due October 2010 declined 3/32, or 93 U.S. cents per $1,000 face amount, to 100 2/32. Ten- year Treasuries yielded 3.93 percent. The difference between the two yields narrowed by 3 basis points to 245 basis points. The MSCI World Index of equities added 1.3 percent after results from Clariant AG and Marks & Spencer Group Plc eased concern that profits will slump, while money-market interest rates declined. Futures on the Standard & Poor's 500 Index expiring in December climbed 2.1 percent as MasterCard Inc. posted better-than-estimated earnings. Ten-Year Loss Ten-year notes handed investors a loss of 0.8 percent last month, a Merrill Lynch & Co. index showed, on 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, from an earlier estimate of $142 billion. The U.S. Treasury may say Nov. 5 it plans to sell a net $388 billion of bills, notes and bonds this quarter, compared with $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. 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 today to 5.25 percent, the third reduction in as many months. Ten-year yields declined 13 basis points to 5.27 percent. Factory Orders ``There's a modicum of pressure ahead of the refunding announcement and the U.S. election,'' said Richard McGuire, senior fixed-income strategist in London at RBC Capital Markets. ``Increasingly poor economic backdrops should ensure bonds continue to operate in a bullish environment.'' Any further decline in U.S. bond prices may be limited before a report that will probably show factory orders fell, bolstering speculation that the Federal Reserve will cut interest rates to revive growth. 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. The Commerce Department will release the figures at 10 a.m. in Washington. Futures on the Chicago Board of Trade show a 53 percent chance Fed policy makers will reduce the target rate for overnight bank loans to 0.5 percent from 1 percent on Dec. 16. The rest of the bets are for a quarter-point cut. 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. `No Growth' ``I don't see any economic growth through 2009,'' Fed Bank of Dallas President Richard Fisher said in an interview with Bloomberg Television. ``The credit crisis reached up and grabbed the throat of the global economy and choked off economic growth.'' Ten-year Treasuries underperformed the equivalent German bond. The 10-year note's yield was 11 points higher compared with 25 basis points lower in early October. 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 another Merrill Lynch index. The Fed cut interest rates twice last month and investors sought the safest securities as credit markets froze and the S&P 500 index fell almost 17 percent, the most since 1987. Money Markets Banks' borrowing costs for dollars fell for a 17th day, with the London interbank offered rate for three-month funding dropping 15 basis points to 2.71 percent, the British Bankers' Association said today. That was the lowest rate in almost five months. Yields indicate financial markets are thawing, damping demand for bonds. 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 5.83 percentage points more than Treasuries, narrowing from a six-year high of 8.65 percentage points on Oct. 24. Waning Bid ``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 2.45 percentage points as shorter maturities outperformed. The difference was 2.48 percentage points yesterday, steepening 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 reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net

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