By Kim-Mai Cutler and Wes Goodman Nov. 13 (Bloomberg) -- Ten-year Treasury notes rose as stocks declined and as Wal-Mart Stores Inc. and Intel Corp. cut earnings forecasts, signaling the credit crunch is affecting the broader economy. Two-year yields were near the lowest level in five years after Goldman Sachs Group Inc. said Treasury prices will rise more than it predicted last week as the economic slowdown deepens. A U.S. government report may show the number of workers receiving unemployment benefits was near the most in a quarter century. The Treasury plans to sell $10 billion of 30-year bonds today as it raises money for a $700 billion rescue package. ``The gains in Treasuries are very much a reaction to downward pressure on stocks and the accumulation of weaker data,'' said Cyril Beuzit, head of interest-rate strategy at BNP Paribas SA in London. ``A 50 basis-point cut from the Federal Reserve is now fully priced in.'' Ten-year yields slid 3 basis points to 3.71 percent as of 7:05 a.m. in New York, according to BGCantor Market Data. The 3.75 percent security due November 2018 rose 8/32, or $2.44 per $1,000 face amount, to 100 10/32. The two-year yield was little changed at 1.17 percent, near the lowest since June 2003. It will drop to 1 percent by the end of November, Beuzit said. ``The level of two-year yields is starting to spook a few people,'' said Sean Maloney, a fixed-income strategist for Nomura International Plc in London. ``We're very close to the lowest yields we've ever seen so the community is taking stock of that.'' Stocks Slide Europe's Dow Jones Stoxx 600 Index lost 2 percent. U.S. stock-index futures dropped 0.9 percent. Wal-Mart, the world's largest retailer cut its full-year profit forecast to a range of $3.42 to $3.46 from $3.43 to $3.50. Intel, the largest computer-chip maker, cut its fourth-quarter revenue estimate by about $1 billion. Bonds were buoyed as data indicated global growth is weakening, with Germany sinking into a recession. The Organization for Economic Cooperation and Development cut its forecast for global growth in 2009 for the second time this year. The economy of the OECD's 30 members will expand 1.4 percent in 2008 and contract 0.3 percent in 2009, the Paris- based group said today in its latest economic projections. President-elect Barack Obama inherits a U.S. economy that shrank 0.3 percent in the third quarter and will contract 2 percent in the fourth, based on a Bloomberg News survey of banks and securities companies. Paulson Plan U.S. debt gained after the Treasury Secretary Henry Paulson yesterday gave up plans to buy mortgage assets and decided to focus on increasing lending to consumers. This may erode demand for stocks because it makes it difficult to judge what the government is doing, said Andrew Brenner, co-head of structured products in New York at MF Global Ltd., the world's largest broker of exchange-traded futures and options contracts. The 10-year Treasury futures contract for December delivery may climb to 118 from 116 27/32 now, Goldman said in a report today. Ten-year yields will fall to 3.5 percent in three months, according to London-based strategists Francesco Garzarelli, Michael Vaknin and Sergiy Verstyuk. The 30-year bond yield was little changed at 4.17 percent, down from 4.609 percent at the last auction on Aug. 7. Investors at that sale bid for 2.4 times the amount of debt on offer, versus the average of 2.19 for the past 10 sales. The difference in yield between two- and 30-year notes widened to 3.01 percentage points, the most since March. `More Risky' ``The longer-end is inherently more risky,'' Maloney said. ``The market's still taking down paper at expensive levels. It's a symptom of the very substantial safe-haven bid.'' The number of people receiving U.S. jobless benefits totaled 3.825 million in the seven days ended Nov. 2, versus 3.843 million the week before, according to the median forecast in a Bloomberg News survey of economists. The Labor Department releases the number at 8:30 a.m. in Washington. Investors are favoring government bonds over higher- yielding securities as global economic growth slows. Treasuries have returned 6.5 percent this year, while the gain on German debt is 7.9 percent and 1.3 percent on Japanese securities, according to indexes complied by Merrill Lynch & Co. The Treasury Department is increasing its debt sales to pay for the economic rescue plan. It auctioned $25 billion of three- year notes on Nov. 10 and $20 billion of 10-year securities yesterday. Philadelphia Fed President Charles Plosser will speak at 12 p.m. in Pittsburgh and Minneapolis Fed President Gary Stern addresses a community lunch at 1 p.m. in Winona, Minnesota. Banks and securities companies globally have reported almost $1 trillion of losses and writedowns tied to a meltdown in the credit markets since the start of 2007. The U.S., Japan, the U.K. and the euro region are headed for their first simultaneous recessions since World War II, according to the International Monetary Fund. To contact the reporters on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net

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