LONDON: US Treasury yields fell in Europe on Wednesday, bringing them closer to their lowest levels in at least 60 years as concerns mounted over Spain's ability to prop up its banking sector and regional governments.

Demand for safe-haven assets was strong in early trading, with German Bund yields hitting record lows across much of the curve.

Spain has been propelled back to centre stage in the euro zone debt crisis after saying it would issue new debt to fund its ailing lenders and indebted regions, despite borrowing costs approaching levels seen as unsustainable in the long term.

Benchmark 10-year US Treasury yields were 4.5 basis points lower at 1.705 percent, edging closer to September's low of 1.67 percent, which was the lowest level in at least 60 years.

Investec chief economist Philip Shaw said the odds were against it breaking that level unless the euro zone crisis got bad enough to hamper the US economy.

"The US recovery seems to be persisting despite what's going on in the euro zone ... and "Operation Twist" will finish next month, taking away one support for longer-dated bonds," Shaw said. "Obviously you can't rule anything out in these markets but there are reasons to explain Bund outperformance versus Treasuries generally, and perhaps why that should persist unless things get very much worse."

Investors will be searching US economic indicators for clues about the economic outlook, to gauge whether the Federal Reserve will extend its bond purchases after its so-called "Operation Twist" stimulus programme expires at the end of next month. Monthly payroll data on Friday is expected to show that employers added 150,000 workers in May, while data on Thursday is expected to show that US gross domestic product grew 2 percent in the first quarter.