Nov. 5 (Bloomberg) -- Treasuries rose as stocks fell after reports showed firms shed more jobs than forecast and service- sector growth slowed, fueling concern the economy will worsen even as President-elect Barack Obama moves to spur growth.

Longer-maturity debt led the gains, pushing the difference in yields between two- and 10-year notes to as little as 2.21 percentage points, the least since Oct. 27. The Treasury Department said it will sell $55 billion in debt next week, about what traders expected.

``The data has not been very good, and that's certainly weighing on yields,'' said T.J. Marta, a fixed-income strategist in New York at RBC Capital Markets Corp., the investment-banking arm of Canada's biggest lender. ``The overall macro theme is we woke up this morning to a global growth problem.''

Yields on the benchmark 10-year note declined 3 basis points, or 0.03 percentage point, to 3.69 percent at 4:15 p.m. in New York, according to BGCantor Market Data. The 4 percent security maturing in August 2018 rose 1/4, or $2.50 per $1,000 face amount, to 102 1/2. The yield on the 30-year bond dropped 5 basis points to 4.14 percent.

The two-year note's yield decreased 2 basis points to 1.35 percent.

Additional Ways to Help

The Treasury Department said it is ``actively considering'' additional ways to help financial markets and revive lending, according to an update to Congress on the department's $700 billion bank-rescue program.

The Institute for Supply Management's non-manufacturing index, which covers almost 90 percent of the economy, decreased to 44.4, the lowest level since records began in 1997, the Tempe, Arizona-based group said today. A reading of 50 is the dividing line between growth and contraction. An ADP Employer Services report showed the U.S. economy shed 157,000 jobs in October, the most in almost six years.

A government report will likely show that payrolls shrank by 200,000 workers in October, according to the median estimate of 74 economists surveyed by Bloomberg News. The Labor Department is scheduled to release the report on Nov. 7. The unemployment rate may jump to its highest level in more than five years.

The Standard & Poor's 500 Index plunged 5.3 percent amid concern the worsening economy will crimp profits even as Obama takes steps to revive it. Democrats picked up seats in Congress in the elections, making it potentially easier to push through Obama's plans to revive the shrinking U.S. economy.

Libor Falls

Government bailouts totaling about $3 trillion, interest- rate cuts around the world and unprecedented cash injections by central banks drove the London Interbank Offered Rate, or Libor, that banks charge each other for three-month dollar loans to a four-year low. It fell 20 basis points to 2.51 percent, the lowest level since December 2004, the British Bankers' Association said today.

``With Libor coming down, the market is shifting focus from the financial-market crisis to economic fundamentals,'' said Alex Li, an interest-rate strategist in New York at Credit Suisse Securities USA LLC.

The Treasury said it plans to sell $55 billion in government debt this quarter and bring back auctions of three- year notes as a slowing economy balloons the budget deficit to a record level.

The department's so-called quarterly refunding of longer- dated securities is the biggest in four years. The Treasury plans to auction $25 billion in three-year notes on Nov. 10, $20 billion in 10-year notes Nov. 12 and $10 billion in 30-year bonds Nov. 13, the department said.

`More Frequent'

Three-year notes, which had been suspended since May 2007, will now be issued on a monthly basis, it said.

``Three-year notes will come monthly and not quarterly, so I think that is more frequent than people expected,'' said Stephen Van Order, a strategist in Bethesda, Maryland, at Calvert Asset Management, which oversees $10 billion in bonds.

Longer-maturity Treasuries rallied yesterday as investors bought the securities as a hedge against the early prepayment of home mortgages that underlie mortgage-backed bonds. The spread between Fannie Mae current coupon, 30-year mortgage-bonds and 10-year Treasury notes fell 13 basis points, the six straight day of declines, to 1.75 percentage points.

Futures on the Chicago Board of Trade show an 85 percent probability the Fed will reduce its target rate for overnight bank loans by 50 basis points to 0.5 percent next month. The odds were 55 percent yesterday.

To contact the reporters on this story: Cordell Eddings in New York at ceddings@bloomberg.net; Dakin Campbell in New York at dcampbell27@bloomberg.net.

Last Updated: November 5, 2008 16:27 EST