TREASURIES-1-month yields sink below zero in cash scramble

* T-bill yields sink in scramble for cash

* Global stock sell-off adds to safe-haven bids

* Money market funds seen as key buyers

By Richard Leong

NEW YORK, Sept 17 (Reuters) - The yields on U.S. Treasury bills plummeted on Wednesday, pushing the one-month yield briefly below zero, as turbulent financial markets spurred a scramble for cash and ultra low-risk investments.

Money managers piled into Treasuries as they anticipate heavy redemption demands from investors spooked by deep losses at a money-market mutual fund run by one of the industry's pioneers, which was burned by the bankruptcy of Lehman Brothers Holdings Inc.

"They have no choice but to buy short-dated Treasury bills," Carl Lantz, interest rate strategist with Credit Suisse in New York said of money market funds.

One-month T-bill yield US1MT=RR traded 0.14 percent, down 43 basis points from late Tuesday. It reached briefly below zero percent, according to analysts, which is the lowest level since the one-month bill was reintroduced in 2001.

The scramble for short-dated government debt was sparked by troubles at the Reserve Primary Fund. The money market mutual fund fell below $1 a share in net asset value due to losses on its holding of securities issued by Lehman. For details, see [ID:nN16694015]

Longer Treasury note yields were mixed after the government made a special $85 billion loan to struggling insurance giant American International Group Inc. (AIG.N).

Moreover, a renewed sell-off in global equities intensified safe-haven bids for U.S. government bonds, analysts said.

Among other maturities, two-year Treasury notes US2YT=RR were up 5/32 in price at 101-9/32. Their yield which moves inversely to price was 1.71 percent, down 8 basis points from late Tuesday.

Benchmark 10-year debt US10YT=RR was up 3/32 in price for a yield of 3.42 percent, down from 3.43 percent on Tuesday. (Reporting by Richard Leong; Editing by Tom Hals)