Bonds build on Greenspan, subprime fears

NEW YORK (CNNMoney.com) -- Bond prices headed higher Monday, bolstered by a warning on the economy from former Federal Reserve Chairman Alan Greenspan and continued worries over the subprime mortgage market.

The dollar fell against the euro and the yen.

The benchmark 10-year note gained 10/32, or $3.12 for every $1,000 invested, to yield 4.63 percent, down from 4.67 late Friday.

The 30-year bond gained 20/32, or $6.25 on a $1,000 bond, to yield 4.73 percent, down from 4.78 in the previous session. Bond prices and yields move in opposite directions.

The five-year note rose 5/32 to yield 4.62 percent, while the two-year note gained two ticks, yielding 4.76 percent.

With no major economic reports on tap Monday, investors focused on comments delivered Monday by Greenspan, who warned that the U.S. economy might fall into recession by the end of the year.

"When you get this far away from a recession invariably forces build up for the next recession, and indeed we are beginning to see that sign," Greenspan said.

Treasury prices were also supported by concerns from last week that the default risk was increasing in the subprime mortgage market, which services borrowers with weak credit histories.

Trickier, riskier mortgage deals have gone awry with the recent housing downturn, with troubling implications for major banks like HSBC.

"There is some follow-through buying from Friday, and the comments from Greenspan talking about a potential recession at the end of this year are having an impact," Adam Brown, co-head of U.S. Treasury trading at Barclays Capital in New York, told Reuters.

But bond traders will have an sizeable number of economic reports to sift through later in the week.

Slated for release Tuesday are monthly readings on consumer confidence and existing homes sales, while the fourth-quarter GDP reading will be Wednesday's big number. And construction spending and personal consumption and income for January will cap a flurry of reports due out Thursday.

Investors have worried lately that the Federal Reserve would not cut interest rates any time soon, although a string of damaging economic news could spark speculation of a rate cut.

In currency trading, the euro bought $1.3187, up from $1.3166 late Friday. The dollar bought ¥120.55, down from ¥121.09 in the previous session.

--from staff and wire reports

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