By Wes Goodman Nov. 20 (Bloomberg) -- Treasuries rose for a fifth day as Asian stocks extended a global slump before a private U.S. report on leading indicators that economists forecast will show the recession is deepening. Two-year yields were near a record low as investors sought the relative safety of short-term government debt following a plunge in U.S. stock benchmarks to their lowest levels since 2003. Traders added to bets for the Federal Reserve to cut its main interest rate by as much as 75 basis points from 1 percent when policy makers meet next month. ``All the money is going into Treasuries,'' said Satoshi Okumoto, a general manager in Tokyo at Fukoku Mutual Life Insurance Co., with $59.5 billion in assets. ``People don't have any other option. The Fed may cut its rate to zero percent in December.'' The yield on the 10-year note dropped four basis points to 3.26 percent as of 6 a.m. in London, according to BGCantor Market Data. The price of the 3.75 percent security maturing in November 2018 increased 17/32, or $5.31 per $1,000 face amount, to 104 4/32. Two-year notes, among the most sensitive to changes in borrowing costs because of their short maturities, yielded 1.06 percent. The rate declined to 1.0558 percent on June 13, 2003, the lowest since the Fed began tracking the figure in 1976. Treasuries, Corporates Treasuries of all maturities returned 8.1 percent this year, according to Merrill Lynch & Co.'s U.S. Treasury Master index. Demand pushed three-month bill yields to 0.06 percent, near the lowest since World War II. U.S. corporate bonds handed investors a 16 percent loss, heading for their worst year since the Merrill records started in 1997. The index of U.S. leading economic indicators fell 0.6 percent in October, declining for the third time in four months, according to the median forecast in a Bloomberg News survey of economists before the New York-based Conference Board issues the figure today. A separate report may show manufacturing in the Philadelphia region shrank in November. The MSCI Asia Pacific Index of regional shares fell 4.9 percent, dropping for a fourth day, following a 6.1 percent loss in Standard & Poor's share index. Notes fell initially as debt sales increase to fund the government's $700 billion rescue package, while officials are calling for more money to stimulate the economy and pull the U.S. out of recession. Treasury Sales The Treasury will probably announce today that it plans the biggest-ever sales of two- and five-year securities next week, estimates from Wrightson ICAP LLC show. It may auction $36 billion of two-year notes Nov. 24 and $25 billion of five-year debt Nov. 25, according to Wrightson, an economic advisory firm that specializes in government finance in Jersey City, New Jersey. ``There's going to be an absolute mountain of Treasuries on the market,'' said Rob da Silva, managing director of Asia- Pacific fixed income at Principal Global Investors in Sydney. The securities are ``expensive,'' he said and is avoiding them. Default protection costs rose on Japanese debt issued by companies, matching last month's record. The Markit iTraxx Japan index of credit-default swaps climbed as much as 35 basis points to 3.30 percentage points, according to Credit Suisse Group AG. Credit-default swaps, contracts to protect against or speculate on default, pay the buyer face value if a company fails to adhere to its debt agreements. Barack Obama is scheduled to take office in January with the U.S., Japan and Germany, the three-biggest economies, in recession. The U.S. may sell $1.5 trillion in debt this fiscal year, which began Oct. 1, according to Treasury Secretary Henry Paulson. The department announced on Nov. 3 it plans to borrow $550 billion in the current quarter and $368 billion in the January-March period. Futures on the Chicago Board of Trade show an 82 percent chance the Fed will reduce its 1 percent rate by 50 basis points at its next meeting on Dec. 16 to spur the economy. The odds of a 75-basis-point cut rose to 18 percent as of late yesterday in New York from zero percent a week earlier. To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net.

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