TREASURIES-Nervous investors chase U.S. bond yields to record lows
* U.S. 10-year yield touches record low at 1.53 pct * Europe, poor U.S. data stoke safety bids for bonds * U.S. Treasuries set for best month since September * Investors also snap up German, Japanese, Swiss debt By Richard Leong NEW YORK, May 31 (Reuters) - Fears about Spain's troubled banks and Greece's possible exit from the euro zone deepening Europe's debt crisis spurred a global race for safe assets on Thursday, sending benchmark U.S. bond yields to record lows. Compounding investor anxiety was a batch of disappointing data on U.S. jobs and manufacturing before Friday's closely watched government payroll report. These weak figures raised bets the current tepid U.S. growth could vanish and the likelihood the Federal Reserve would embark on a third large-scale bond purchase to avert a recession, analysts and traders said. Benchmark 10-year Treasuries yields fell as low as 1.53 percent, the lowest ever on records going back more than two centuries, according to Reuters data. They last traded at 1.57 percent, down 5 basis points on the day. "These yields show there is a lot of fear out there. There is a fear of a break-up of the euro," said Andrew Richman, fixed income strategist at SunTrust Private Wealth Management in Palm Beach, Florida. "People are pulling out of risk and into cash and Treasuries." Other than U.S. Treasuries, pension funds, insurance companies and other professional investors scrambled for other traditional safehaven government bonds like those of Germany, Japan and Switzerland. They also grabbed Swedish, Finnish and Danish sovereign debt on the perception these Scandinavian countries are among the least vulnerable in case the euro zone's finances deteriorate further. In fact the 10-year yields of these countries are lower than of the United States. In a sign of how the stampede for safety has skewed the global debt market, shorter-dated Swiss yields moved into negative territory, while the German two-year yield slid near zero this week. They are below the interest rate on U.S. one-month bills. "The market is moving on emotions. People are getting extremely scared," Richman said. Global stocks, corporate bonds and commodities showed some stabilization late Thursday after they were sold off hard earlier as investors bailed. The few winners in this tumbling yield climate are holders of Treasuries and U.S. homeowners whose could refinance into lower interest mortgages. The U.S. government debt market is poised to record its best month since September. Barclays' Treasury total return index was up 1.52 percent through Wednesday, which would be the biggest monthly rise in eight months. Long-dated Treasuries fared best among all maturities. Barclays' return index on Treasury issues whose maturities are longer than 20 years was up 7.59 percent through Wednesday. This would be the seventh biggest monthly rise for this index, according to Barclays.
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