US Treasury prices jumped on Monday as fears of Italy buckling under Europe's debt crisis rattled investors and stoked their appetite for bonds, boosting the chances of strong demand at this week's debt auction. The Treasuries market rallied for a second session while investors pulled out of stocks as European officials met to discuss options for Greece's ongoing fiscal woes and fears grew the crisis could spread to Italy, the eurozone's third-largest economy.
Concerns over the rising bailout costs in Europe and a slowing US economy in the wake of Friday's disappointing jobs data overshadowed the risk of a US default. Washington has shown no sign of reaching a deal to increase the $14.3 trillion debt limit before an August 2 deadline.
"The combination of the jobs number and the debt situation in Europe have done a job on the stock market. It's caused another flight into Treasuries," said Jim Kochan, chief fixed income strategist with Wells Fargo Fund Management in Menomonee Falls, Wisconsin, which oversees $400 billion in assets.
The safe-haven buying pushed benchmark yields back below the key 3 percent level. Since Friday, the 10-year yield has fallen nearly 22 basis points, the largest two-day decline in more than 13 months. The 10-year Treasury note last traded up 29/32 in price for a yield of 2.92 percent, down nearly 11 basis points from Friday.
Five-year Treasury notes ended 15/32 higher in price to yield 1.47 percent, down from 1.58 percent late Friday, while 30-year bonds were 1-12/32 higher to yield 4.21 percent from 4.29 percent on Friday. Concerns that Italy might be the next casualty of the eurozone debt crisis gave an added sense of emergency to the meeting of the European finance officials. The cost of insuring Italy's debt in the credit default swap market jumped 51 basis points to a record 300 basis points, or $300,000 per year to insure $10 million in debt for five years, according to Markit data.