April 30, 2012 / 1:30 PM / in 6 years

TREASURIES-Bonds rise on U.S., Europe growth worries

* U.S. spending/income grow within expectations
    * Euro zone worries grow as Spanish economy shrinks
    * Month-end index buying seen adding bids for bonds
    * Benchmark yields hover at lowest in about 3 months

    By Richard Leong	
    NEW YORK, April 30 (Reuters) - U.S. government debt prices
rose on Monday as anxiety over economic weakness in Europe and
slowing growth in the United States led investors to favor
lower-risk investments over stocks and other risky assets.	
    The March figures on U.S. personal spending and income
showed a resilient consumer sector, which accounts for
two-thirds of the U.S. economic activity, but they might not be
enough to stem further slowing in overall growth.
    Last Friday, the government reported the gross domestic
product from January to March grew at an annualized 2.2 percent,
weaker than expected and slower than the 3.0 percent pace posted
in the last quarter of 2011.	
    Worries about Europe slipping into a recession intensified
after Spain's economy contracted in the first three months of
the year. Spain's fiscal woes deepened after Standard & Poor's
cut the credit ratings of 11 Spanish banks on Monday following
its downgrade of Spain last week. 	
    "Everyone knows the negatives. No one sees the answers yet,"
said Carl Kaufman, portfolio manager at Osterweis Capital
Management in San Francisco, which oversees about $5 billion.	
    On below-average trading volume, benchmark 10-year notes
 traded up 4/32 in price to yield 1.92 percent, down
more than 1 basis point from late on Friday. Thirty-year bonds
 rose 7/32 in price for a 3.11 percent, down 1 basis
point from Friday's close.	
    Bets grew on more central bank help to avert a recession
across Europe. Treasuries slightly lagged German Bunds with
their 10-year yield premium over 10-year Bunds 
widening about 1 basis point near 25 basis points.	
    Purchases from fund managers to rebalance their portfolios
at month-end should keep benchmark yields at their lowest levels
since early February, analysts said.	
    The 10-year yield is on track to fall 29 basis points, its
biggest monthly decline since September, while the 30-year yield
is set to fall 24 basis points, the first drop in four months.	
    Another supportive factor for longer-dated Treasuries is the
ongoing purchases from the Federal Reserve for "Operation
Twist," which is its $400 billion program aimed to hold down
mortgage rates and other long-term borrowing costs.	
    The Fed is slated to buy $1.50 billion to $2.00 billion in
government debt due in Feb 2036 to Feb 2042. It will announce
its next schedule at 2 p.m. (1800 GMT).	
    "People think as long as the Fed has their back, everything
would be fine," Osterweis' Kaufman said.	
    Traders will receive more U.S. data on Monday. The Institute
for Supply Management-Chicago will release its April business
activity index at 9:45 a.m. (1345 GMT).
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