By Wes Goodman Dec. 1 (Bloomberg) -- Treasuries rose, sending 10-year yields to a record low, before U.S. reports that economists estimate will show manufacturing contracted and employers cut the most jobs since 2001. Yields will decline in 2009 as the Federal Reserve lowers its target for overnight loans between banks to zero percent from 1 percent now, JPMorgan Chase & Co., one of the 17 primary dealers that trade directly with the central bank, wrote in a report on Nov. 28. “Risk aversion and the ongoing economic deterioration are keeping yields at these low levels,” said Peter Jolly, Sydney- based head of market research at NabCapital, the investment- banking unit of Australia’s largest lender. The 10-year note yield fell 2 basis points to 2.91 percent as of 2:47 p.m. in Tokyo, according to BGCantor Market Data. The price of the 3.75 percent security due November 2018 rose 5/32, or $1.56 per $1,000 face amount, to 107 7/32. The yield fell as low as 2.89 percent, the least since Federal Reserve daily records started in 1962. A basis point is 0.01 percentage point. The MSCI Asia Pacific Index of regional shares dropped 0.5 percent, its first decline in five days. The U.S. lost 320,000 jobs in November, after 240,000 were cut the month before, according to the median estimate of economists surveyed by Bloomberg News before the Labor Department report Dec. 5. The Institute for Supply Management may say the contraction in manufacturing accelerated last month, according to a separate Bloomberg survey before the report today. Yields to Drop Ten-year yields will decline to 2 percent by the middle of next year and two-year rates will slide to 0.6 percent from 1 percent today, JPMorgan analysts Terry Belton and Srini Ramaswamy in New York said in their report. Investors flocked to Treasuries as the U.S. economy contracted 0.5 percent in the third quarter. President-elect Barack Obama will take control of an economy that will shrink 2.05 percent in the final three months of the year when he comes to office in January, a Bloomberg survey of banks and securities companies shows. The decline would be the biggest since 1990. General Motors Corp.’s board is meeting in Detroit to discuss a rescue plan to present to Congress that may determine if Chief Executive Officer Rick Wagoner can save the maker of Chevrolets and Buicks, people familiar with the plans said. Inflation Concern Ten-year notes fell initially on concern an $800 billion U.S. plan to revive lending to consumers, on top of a $700 billion economic-stimulus plan, will spur inflation. The Bank of Japan plans to hold an emergency meeting this week to discuss a special lending program, public broadcaster NHK said. China is planning a $586 billion stimulus package, while the European Union is coordinating a $253 billion proposal. “Central banks have responded by printing money,” said Hans Goetti, who oversees $10 billion in Asia as chief investment officer at LGT Bank in Liechtenstein (Singapore) Ltd., part of the bank for the wealthy owned by Liechtenstein’s royal family. “At some point you’re going to have an inflation problem.” Goetti said he favors Treasury Inflation Protected Securities. The difference between rates on 10-year TIPS and conventional notes, reflecting the outlook among traders for consumer prices, was 36 basis points. The spread was minus 8 basis points on Nov. 20, a level not seen since Bloomberg began tracking it in 1998. The difference has contracted from this year’s high of 2.68 percentage points set in March. To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net.

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