Treasuries held gains before a government report economists forecast will show the U.S. trade deficit widened as slower global growth reduced demand for the nation’s exports. Investors prepared to bid at a $13 billion 30-year bond sale today, after demand increased at a 10-year note offering yesterday and climbed to a record at a three-year auction on Oct. 9. Waning economic growth in China and the failure of European leaders to contain the euro region’s debt crisis are helping drive investor appetite for the relative safety of U.S. fixed-income securities. “I expect yields to drop a little bit further,� said Ali Jalai, who trades U.S. debt in Singapore at Scotiabank, a unit of Bank of Nova Scotia (BNS), one of the 21 primary dealers authorized to deal with the Federal Reserve. “With China slowing and the weakness in Europe, we could see it translate into less exports. It builds another case for being bullish on Treasuries.� Benchmark 10-year notes yielded 1.68 percent as of 8:03 a.m. London time, based on Bloomberg Bond Trader data. The price of the 1.625 percent security due in August 2022 was 99 17/32. The 30-year bond yield was little changed at 2.88 percent. Ten-year rates fell seven basis points, or 0.07 percentage point, over the past two days. They are approaching the record low of 1.38 percent on July 25. The rate may decline toward 1.6 percent in the coming days, Jalai said. The Bank of Korea cut borrowing costs today for a second time this year, trimming its benchmark interest rate to 2.75 percent from 3 percent. Brazil reduced its main interest rate for the 10th straight time yesterday to a record-low 7.25 percent. Wider Deficit The U.S. trade deficit widened to $44 billion in August from $42 billion in July, according to the median forecast of 73 economists in a Bloomberg News survey before the Commerce Department reports the number today. Separate Labor Department reports today may show weekly claims for initial jobless benefits rose and the import price index increased in September from August. Spain’s debt rating was cut to one level above junk yesterday by Standard & Poor’s, which cited mounting economic and political risks. China’s manufacturing contracted for a second month in September a government survey showed Oct. 1. There are some signs of improvement in the U.S. economy, as President Barack Obama and challenger Mitt Romney prepare to face off in the Nov. 6 election. U.S. unemployment declined to 7.8 percent in September from 8.1 percent the month before, the Labor Department reported Oct. 5. Manufacturing unexpectedly expanded in September, an industry report showed Oct. 1. Auction Demand This week’s three-year debt sale drew a record bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, of 3.96. At yesterday’s 10-year auction, investors bid for 3.26 times the amount offered, versus 2.85 in September. The last 30-year sale on Sept. 13 drew orders for 2.68 times the amount available. The average for the past 10 auctions is 2.65. The Fed announced Sept. 13 it will keep the main interest rate at almost zero until at least mid-2015 and buy $40 billion of mortgage debt every month in a third round of so-called quantitative easing. The central bank is also swapping shorter-term debt in its holdings for longer maturities. It plans to buy as much as $1.25 billion of Treasury Inflation Protected Securities due from January 2019 to February 2042 today as part of the plan, according to the Fed Bank of New York website. The 10-year term premium, a model created by economists at the Fed that includes expectations for interest rates, growth and inflation, was negative 0.91 percent. A negative reading indicates investors are willing to accept yields below what’s considered fair value. The average for the past 10 years is positive 0.44 percent. To contact the reporters on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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