Yields on 10-year Treasury notes fell in yesterday's auction to their lowest level in a year in round two of the government's biggest-ever, $34.25 billion quarterly refunding.

The average yield was 8.52 percent, down from 8.77 percent at the last auction on Aug. 8, which took place in the wake of Iraq's invasion of Kuwait.

As in the first round of this week's auctions, there was heavy bidding by investors seeking a safe haven for their money as they grew concerned about the stability of stocks and corporate bonds. The government received bids totaling $29.1 billion for $11.1 billion in notes.

By bidding down the yields on government securities, investors were also signaling their belief that an economic slowdown would lead to lower interest rates in the coming months.

The decline in rates on the 10-year notes was not as great as on the three-year notes auctioned on Tuesday, because the longer-term securities carry greater risk. But it was the lowest rate on 10-year Treasury notes since Nov. 13, 1989, when they averaged 7.94 percent. The notes will carry a coupon interest rate of 8.50 percent, with each $10,000 in face value selling for $9,986.70.

The Treasury also revised downward to $87.5 billion its estimate of its net borrowing needs for the October-to-December quarter. Earlier, it said it would borrow $97.7 billion during the period. The change reflects the postponement of spending by the Resolution Trust Corp. for the cleanup of the savings and loan industry.

The auction of a record $65 billion this week to enlarge and refinance the federal debt concludes today with the auction of $10.75 billion in 30-year bonds. The Treasury also will auction $12 billion in 161-day cash management bills today.

This refunding is $2 billion larger than the previous record set last August. The auctions are held four times a year to replenish U.S. coffers.

DAY..........TERM.............AMOUNT IN....NEW.....PREVIOUS.....DATE OF .............................BILIONS......YIELD.....YIELD......PREVIOUS ..................................................................YIELD

Monday....13-week bills......$9.8..........7.30%.....7.35%........10/29

..........26-week bills...... 9.8..........7.41......7.50.........10/29

Tuesday...3-year notes...... 12.6..........7.78......8.10.......... 8/7

Wednesday..10-year notes.....11.0..........8.52......8.77.......... 8/8

Thursday..30-year bonds......10.75..........NA........NA........... 8/9

Friday....161-day bills......12.0...........NA.........NA...........NA

Federal funds target rate......7.75%

Prime rate................... 10%

30-year fixed mortgage*...... 9 7/8%

*Average rate on a 30-year mortgage with 3 points.