Dec. 23 (Bloomberg) -- The U.S. 10-year Treasury note may fall for a second day in New York on speculation reports today will show consumer spending and orders for durable goods increased in November, spurring economic growth.

Notes may also drop on expectations a pickup in economic growth will prompt the Federal Reserve to lift its target for overnight loans between banks at meetings next year. The yield on the 10-year note has fallen 0.8 percentage point from this year's high of 4.9 percent on the view five increases in the key interest rate this year would keep inflation from accelerating.

``There have been reasonable signs of growth and it's premature to be as overly negative on the expansion story as bond yields as these levels suggest,'' said Charles Diebel, head of European interest-rate strategy in London at Royal Bank of Scotland Group Plc. ``Our view is we'll see a slightly better macro outturn than people are expecting, which will put the market on a defensive.''

The benchmark 4 1/4 percent Treasury note due in November 2014 was little changed at 100 13/32 at 7:06 a.m. in New York, according to bond broker Cantor Fitzgerald LP. The yield held at 4.20 percent, 13 basis points above a six-week low reached on Dec. 16. The yield may rise to 4.4 percent at the end of the first quarter, Diebel said.

The U.S. Bond Market Association, an industry trade group, recommended trading close in Japan today because of a holiday. It also recommended an early close in U.S. trading because of the Christmas holiday.

Faster Growth

A government report yesterday showed the U.S. economy grew faster than previously estimated during the third quarter and prices rose at a quicker pace. Gross domestic product expanded 4 percent, compared with an earlier estimate of 3.9 percent, and prices rose 1.4 percent, up from 1.3 percent.

The economy is forecast to grow 3.8 percent this quarter, and 3.6 percent next year, according to the median estimate of economists surveyed by Bloomberg News from Dec. 1 to Dec. 8.

U.S. government debt maturing in at least a year is the second-worst performer in 2004, after Japanese debt, among 26 government bond markets tracked by the European Federation of Financial Analyst Societies. U.S. debt returned 3.6 percent through yesterday.

Personal consumption expenditures probably rose for a third month in November, gaining 0.3 percent after increasing 0.7 percent in October, the Commerce Department report is expected to show.

Orders for durable goods, or items made to last at least three years, increased 0.6 percent last month, after falling 1.1 percent in October, according to the median estimate.

The personal consumption expenditure index excluding food and energy, a gauge of inflation tracked by Fed Chairman Alan Greenspan and other policy makers, probably rose 1.5 percent in November from the same month last year, according to the median estimate of economists surveyed by Bloomberg. The index gained 1.5 percent in October. The report will also be released today.

The Fed in July forecast the inflation rate would be 1.5 percent to 2 percent this year and 1.5 percent to 2.5 percent next year.

To contact the reporters on this story: Shamim Adam in Singapore sadam2@bloomberg.net; Steve Rothwell at srothwell@bloomberg.net

Last Updated: December 23, 2004 07:28 EST