Treasuries advanced before government reports that will probably show consumer spending fell in November for a record fifth month and orders for durable goods declined. The difference between two- and 10-year note yields stayed near the lowest since June as investors favored longer-dated securities after the Federal Reserve cut interest rates to as little as zero on Dec. 16. Ten-year yields touched their least on record last week as investors accepted lower returns to safeguard their money amid the deepening global slump. “The data could boost the bond market this week,” said Hidehiko Maejima, international bond strategist in Tokyo at BNP Paribas Securities Japan Ltd., a unit of France’s largest bank. He added that gains in government debt will be limited because “from early next year, money rates may accelerate declines and this will help risk appetite to rise.” The yield on the 10-year note fell three basis points to 2.16 percent as of 12:40 p.m. in Tokyo, according to BGCantor Market Data. The price of the 3.75 percent security due November 2018 climbed 7/32 to 114 1/8. The two-year note yield fell two basis points to 0.88 percent. The spread between the two yields was 1.28 percentage points, little changed from yesterday when it touched the lowest since June 24. BNP’s Maejima said the two-year yield will stay below 1 percent through the first quarter of 2009, because the Fed will not increase the benchmark overnight rate and more negative data is expected to come out. Spending, Goods Orders U.S. personal spending dropped 0.7 percent last month following a 1 percent decline in October, according to a Bloomberg News survey of economists. Durable goods orders fell 3 percent in November after a 6.9 percent decrease in the previous month, according to a separate survey. Both reports are due from the Commerce Department at 8:30 a.m. in Washington today. The 14.5 percent return on U.S. government debt in 2008 is the most in a year since 1995, according to Merrill Lynch & Co.’s U.S. Treasury Master Index. That compares with a 41 percent plunge in the Standard & Poor’s 500 Index of equities this year, poised for its biggest yearly drop since 1931. Sales of new homes in the U.S. fell in November to a 17- year low as credit dried up and consumer confidence sank, the Commerce Department reported yesterday. Purchases dropped 2.9 percent to an annual pace of 407,000, lower than forecast. The TED spread, the difference between the London interbank offered rate, or Libor, that banks charge each other for three- month loans and Treasury bill rates, was little changed at 146 basis points, dropping from a record high of 464 basis points on Oct. 10. That compares with 135 basis points on Sept. 12, the last trading day before Lehman Brothers Holdings Inc. collapsed.

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