Treasurys: 2-year yield hits record low

NEW YORK (CNNMoney.com) -- Treasury yields were sharply lower Monday, with the yield on the two-year note hitting a record low, as global worries reignited investors' flight to safety.

European terrorism concerns and speculation that the Federal Reserve will ramp up its purchase of U.S. Treasurys sparked buying in shorter-term notes, which sent yields falling.

The yield on the 10-year note declined to 2.48% from 2.53% late Friday. The 5-year yield slipped to 1.23%. The 30-year bond fell to 3.71% from 3.72%.

The 2-year yield dropped to a record low just under 0.4%, according to Kim Rupert, fixed income analyst at Action Economics.

"The increased terrorism worries overseas are adding to risk aversion," Rupert said, referring to a U.S. State Department alert about potential terrorist attacks in Europe.

Treasury prices had already been under pressure heading into the weekend, Rupert noted. On Friday, New York Fed president William Dudley said a dour outlook for U.S. jobs and inflation means the central bank will probably need to take action sooner rather than later.

The comments underscored a string of disappointing economic reports in sectors including manufacturing, which continues to show weakness. The data have fueled bets the Fed will expand its purchases of U.S. Treasurys. That policy, called quantitative easing, aims to keep borrowing costs low.

Meanwhile, demand was strong at Monday's auctions of over $55 billion in short-term bills.

Investors submitted bids totaling nearly $131 billion in response to an offering of $27.6 billion worth of 3-month bills. The bid-to-cover ratio, which measures demand, was 4.56. That compares with 4.31 at the last 3-month sale in September.

Monday's sale of 6-month bills was also oversubscribed.

On Tuesday, the U.S will offer one-month bills.