JAPAN'S benchmark stock index may fall below 15,000 this week as gloom deepens over signs that Asia's economic slump is dragging down the rest of the world. Shares in exporters such as Sony and Honda are expected to lead the way down as investors fret taht a global slowdown will stunt profit growth. The Dow Jones index has slumped about 10 per cent in the past month on concerns that share prices are higher than the dimming outlook justifies.Telecommunication equipment makers led the drop after Ciena Corp warned that increasing competition will result in disappointing earnings. "The irrational exuberance is going to go away," said James Penner at the Montana Board of Investments. Long-term yields could fall to 5 per cent, he said.The yield on the benchmark 30-year bond fell 6 basis points to 5.54 per cent on Friday, the lowest since the Government began regular sales of the securities in 1977. Treasury bonds returned 9.2 per cent so far this year, as US government securities have become the investment of choice for those looking for a refuge from the turbulent financial markets."Interest rates are falling as more and more money moves into the safe haven," said David Kotok, bond manager at Cumberland Advisors in New Jersey. "I wouldn't be a bit surprised to see further declines."The Dow Jones fell 2 per cent on the week to 8,425, its lowest close in six months.

Mr Penner predicted that more companies would issue profit warnings over the next few weeks because of the Asian slump.. "I believe we're going to see more of it."The rush to Treasuries is not the only factor that bond bulls say will push interest rates even lower. As economies around the world slow, the soaring consumer confidence that fuelled the eight-year US economic expansion is bound to return to earth.Concern about slower growth and waning corporate profits is also shaking up the stock market. "Treasuries are obviously the place to be," said Michael Mullaney, manager at Boston Partners Asset Management. "They'll most likely be the best- performing asset class for the foreseeable future." As the economic turmoil in Asia and Russia spreads through global financial markets, it is likely to curb growth in the US and drive interest rates lower. Investors piled into Treasuries last week, sending yields to record lows, after Japan said its recession was deepening and speculation grew that Russia might devalue its currency or default on debt payments. "If you pull back the drapes, it's a mess outside," said David Jallits, bond manager at Strategic Fixed-Income in Virginia. BOND MARKET bulls say the rally that pushed yields on benchmark 30-year US Treasuries to a record low of 5.54 per cent on Friday is not over.

"Though we have a stream of economic data this week, we don't expect any of it to be spectacularly weak," said Philip Shaw, chief economist at Investec."Gilts will probably stay at these levels."Reports are expected to show inflation slowing in July but still above the Government's 2.5 per cent target Only a modest rebound in July retail sales is forecast.. "They look extremely good value and the theme of industry consolidation has not gone away."On Tuesday BP announced plans to buy Amoco for $53bn (pounds 32bn), which has raised speculation of more link-ups in an industry not previously considered as one where mergers and acquisitions were set to take place. This week oil traders will be watching developments in Saudi Arabia, the world's biggest oil exporter, which announced cuts in volume of crude oil available for collection by customers. That could boost the price of oil, which has languished near 10-year lows for weeks."If you could get a stabilisation in the oil price BP would be worth going for," said Mr Talbut. Still, "the oil price can still scupper anything the companies can do themselves." He said independent oil explorers Lasmo and Enterprise Oil could be bid targets.Gilts are expected to be little changed as a slew of economic reports leave intact expectations that interest rates have peaked but will not be cut soon. Declines in the past few days by the leading retail banks on concern about bad debts in Asia are figured into prices. Lloyds TSB and Barclays, along with HSBC Holdings and Standard Chartered, which both rely on Asia for about half their profits, could all claw back some recent losses."We would focus on the financials," said Mr Talbut.