LONDON: US government bond prices rose on Monday, keeping yields near historic lows as investors parked their cash into safe-haven instruments, seeking shelter from the euro zone debt crisis which saw Italy downgraded last week.
On Friday, Moody's cut Italy's credit rating by two notches, citing concerns about the liquidity of its debt market and expectations that the economy would worsen.
Confidence in the euro zone's ability to stem selling pressure in Spanish and Italian debt markets was set to remain shaky over the next few weeks. Germany's top court set a Sept. 12 deadline for a decision over whether it would block the latest version of the euro zone rescue fund.
Worries about flagging growth in the United States and other large economies also lurked in the background. Retail sales and manufacturing data later in the day will provide more clues about whether the Federal Reserve is going to ease monetary policy further.
"After seeing the European Central Bank cutting the deposit rate to zero earlier this month, the expectation is that the Federal Reserve is going to do something as well in the near future," one trader said.
T-note futures were 11/64 higher at 134-23/32, while 10-year benchmark yields were 1.5 basis points lower at 1.4757 percent.
Ten-year yields have been stuck in a narrow 1.45-1.70 percent range in the past month, not far from the 1.44 percent level touched in early June, which is the lowest going back to the early 1800s, based on data gathered by Reuters.
"Uncertainty over the US economy and ongoing concerns about peripherals in Europe suggest that Treasuries should remain well underpinned," said Nick Stamenkovic, bond strategist at RIA Capital Markets in Edinburgh.
"If we saw any selloff in risk markets we could see 10-year yields heading to 1.40 and below."
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