By Anchalee Worrachate Dec. 12 (Bloomberg) -- European government bonds rose after the U.S. Senate rejected a $14 billion bailout plan for American automakers, threatening to deepen the global recession. The gains drove the yield on the German two-year note 10 basis points lower as trading began as investors sought safety in government debt. Yesterday’s Senate vote fell short of the 60 needed to pass a plan aimed at preventing the collapse of General Motors Corp. and Chrysler LLC. Stocks tumbled, with the MSCI Asia Pacific Index falling 3.6 percent today and U.S. stock futures dropping 3.8 percent. “We are actually at the beginning of the crisis hitting the real economy,” said Kornelius Purps, a fixed-income strategist at Unicredit Markets and Investment Banking in Munich. “You will see corporate failure coming. Interest rates will have to fall further and bonds are going to continue to do well.” The yield on the two-year note fell to 2.11 percent by 7:05 a.m. in London. The 4 percent note due September 2010 rose 0.17 or 1.7 euros per 1,000-euro ($1,326) face amount, to 103.18. The yield on the 10-year German bund, Europe’s benchmark government security, also dropped 10 basis points, to 3.11 percent. German bonds returned 10.4 percent this year, compared with 8.3 percent for gilts and 12.2 percent for U.S. Treasuries, according to Merrill Lynch & Co.’s German Federal Government, U.K. Gilts and U.S. Treasury Master indexes. By comparison, the Dow Jones Stoxx 600 Index slid 44 percent and Germany’s DAX Index lost 41 percent. Crude oil declined 52 percent and gold 2.9 percent. To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net

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