TREASURIES-Bonds rise on renewed credit worries

(Updates market prices)

By Richard Leong

NEW YORK, May 9 (Reuters) - U.S. Treasury debt prices rose on Friday as renewed credit worries kindled demand for low-risk investments, sending benchmark 10-year notes to their best week in nearly two months.

Bonds climbed following news that American International Group (AIG.N: Quote, Profile, Research), the world's largest insurer, posted a record $7.8 billion quarterly loss. For details, see [ID:nN09565485]

"We saw some pretty good buying ... on safe-haven demand on renewed concerns on credit issues with AIG's losses," said Kim Rupert, managing director of global fixed-income analysis with Action Economics LLC in San Francisco.

The dismal AIG results fanned doubts about a recovery in credit markets. Other financial companies including Swiss bank UBS (UBSN.VX: Quote, Profile, Research) and U.S. home-finance company Fannie Mae (FNM.N: Quote, Profile, Research) have announced this week a fresh wave of asset write-downs and credit losses stemming from subprime mortgages.

Credit fears have dragged equity markets from their recent peak, and benchmark 10-year Treasury yields from their four-month high set earlier this week.

Ten-year note's yield <US10YT=RR>, which moves inversely to its price, last traded at 3.75 percent, down from 3.78 percent late on Thursday. It briefly moved above 3.95 percent just two days ago.

Major U.S. stock indexes were down as much as 0.8 percent following a 2 percent drop in Tokyo and a 1 percent fall in Europe. See [.N]