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NEW YORK (Reuters) - U.S. Treasury debt prices rose on Tuesday, pushing benchmark yields below 2 percent for the first time in over four weeks as worries about the pace of global economic growth bolstered demand for safe-haven U.S. government debt.
Adding to the bullish impact on Treasuries from Friday's weak U.S. employment report for March were growth concerns in the euro zone, with Spain taking center stage in the region's debt crisis.
As European markets reopened after the Easter break, German Bund yields hit their lowest since September and Italian and Spanish bond yields continued their march higher after sentiment towards those two countries soured following a weak Spanish bond sale last week.
"The bad news on (U.S.) employment brought about more doubt about the global recovery and how vulnerable we are to the double-dip (recession)," said William Larkin, fixed income portfolio manager at Cabot Money Management in Salem, Massachusetts.
Benchmark 10-year Treasury notes were trading 18/32 higher in price to yield 1.986 percent, marking the lowest since March 8 and down from 2.05 percent late Monday.
Benchmark yields were still being impacted by March U.S. jobs growth that came in well below expectations last week, casting doubt over the strength of the U.S. economic recovery.
Before the jobs data, market participants had interpreted recent comments from Fed policy-makers and improved data to mean the bar for further monetary stimulus was extremely high.
However, a Reuters poll on Monday showed most major Wall Street firms expect anemic growth in the U.S. jobs market and a struggling economic recovery to force the Federal Reserve to undertake another round of monetary stimulus, most likely to be announced in June.
The Federal Reserve bought $1.843 billion of longer-dated Treasuries on Tuesday morning, and was scheduled to buy a further $4.25 billion to $5 billion of longer-dated Treasuries on Tuesday afternoon.
The purchases are part of the central bank's latest stimulus program, which has been nicknamed "Operation Twist." Under Twist, the Fed is selling shorter-dated holdings and buying longer-dated debt to extend the maturity of its portfolio. The program is scheduled to last through June.
While the Fed is buying, the U.S. Treasury will sell $32 billion of three-year notes on Tuesday afternoon, then $21 billion of reopened 10-year notes Wednesday and $13 billion of reopened 30-year bonds on Thursday.
Ahead of Tuesday's auction, three-year notes were trading 3/32 higher in price to yield 0.42 percent, down from 0.45 percent late Monday. In the when-issued market, considered a proxy for where the yield might come in at auction, three-year notes were trading with a yield of 0.43 percent.
Editing by James Dalgleish