Nov. 4 (Bloomberg) -- Treasuries were little changed, after the biggest rally in a week, on speculation a government report on factory orders today will show the U.S. economy is shrinking enough to lead the Federal Reserve to cut interest rates again.

Yields on two-year notes, among the most sensitive to rate changes, held at the lowest in a week after Fed Bank of Dallas President Richard Fisher said the economy probably won't expand in 2009. Futures on the Chicago Board of Trade show a 54 percent chance the central bank will reduce its target for overnight bank loans, now 1 percent, to 0.5 percent at its Dec. 16 meeting. The rest of the bets are for a quarter-point cut.

``Yields will fall because the recession is going to last for a year,'' said Shuhei Mochizuki, an assistant manager in the foreign bond section at Sumitomo Life Insurance Co. in Tokyo, Japan's fourth-largest life insurer by assets with the equivalent of $30.3 billion in non-Japanese debt. ``Treasuries have liquidity and they're very safe.''

Two-year notes yielded 1.44 percent as of 9:35 a.m. in Tokyo, according to BGCantor Market Data. The 1.5 percent security maturing in October 2010 traded at a price of 100 4/32. Ten-year notes yielded 3.91 percent.

Two-year rates will fall to 1.25 percent and 10-year yields will be 3.6 percent by year-end, Mochizuki said.

Orders placed with U.S. factories declined 0.8 percent in September, following a 4.4 percent slide in August, based on the median forecast of economists surveyed by Bloomberg News before the Commerce Department report at 10 a.m. in Washington.

``I don't see any economic growth through 2009,'' Fisher said in a Bloomberg Television interview yesterday. ``The credit crisis reached up and grabbed the throat of the global economy and choked off economic growth.''

To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net.

Last Updated: November 3, 2008 19:55 EST