LONDON: US government bonds rallied in Europe on Monday, with investors nervous about the absence of a Greek debt swap deal looking for safe instruments to park their cash.
A Fitch downgrade late on Friday of several euro zone states including Italy and Spain and an escalation of bets that Portugal will eventually have to restructure its debt also weighed on assets perceived as risky.
T-note futures were last 10/32 higher on the day at 132-01/32, with 10-year benchmark yields down 3.8 basis points at 1.8523 percent.
"Investors are just a little bit cautious about the (European Union) summit later today, we're not sure what the outcome of that is going to be. The Greek talks have not been concluded, nothing concrete has been announced," RIA Capital Markets bond strategist Nick Stamenkovic said.
EU leaders are expected to sign off on a permanent rescue fund for the euro zone and agree on a balanced budget rule in national legislation when they meet.
Treasury prices have been underpinned by Wednesday's statement from the Federal Reserve that it was likely to hold interest rates near zero until late 2014. The US central bank also left the door open to further purchases of Treasuries and mortgage-backed securities to prop up the economy.
Data released on Friday showed the US economy grew at its fastest pace in 1-1/2 years in the fourth quarter, but a strong rebuilding of inventories by businesses and weak spending on capital goods hinted at slower growth in early 2012.
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