TREASURIES-Rise in Asia on U.S. recession fears

By Satomi Noguchi

TOKYO, Feb 6 (Reuters) - U.S. Treasuries rose in Asia on Wednesday, pushing two-year yields towards their lowest in nearly four years, after a report showing a sharp contraction in the U.S. services sector sparked demand for the safety of debt.

The dismal reading of the Institute for Supply Management's January non-manufacturing index on Tuesday strengthened the view that the U.S. may have already fallen into recession, despite hefty Federal Reserve interest rate cuts and plans in Washington to spend billions to simulate the economy.

"The ISM data on Tuesday wiped out the remaining view that the U.S. economy may be holding up from falling into a recession," said Masatoshi Moriyama, a senior economist at Mitsubishi UFJ Securities.

The two-year Treasury note <US2YT=RR> edged up 2/32 in price to yield 1.887 percent, down 3 basis points from late New York trade on Tuesday and towards the lowest since April 2004.

The ISM's non-manufacturing index plummeted to 41.9 last month from 54.4 in December, its largest monthly decline on record and a far greater drop than Wall Street had expected.

Moriyama said the data renewed fears about an economic slump, and the market is already pricing in the chance of a Fed inter-meeting interest rate cut by its next gathering in March.

The Fed cut interest rates by 50 basis points to 3.00 percent at a policy meeting last month, on the heels of an emergency 75-basis-point cut.

The benchmark 10-year note <US10YT=RR> rose 4/32 in price to yield 3.552 percent, down about 1.5 basis points.