NEW YORK (CNNMoney) -- Investors continued to pile into Treasuries Monday as the intensifying debt crisis in Europe sparked a broad flight to safety.
After falling to a fresh all-time low of 1.87% before the market opened, the yield on the benchmark 10-year U.S. Treasury bond was trading slightly higher at 1.92%. It closed at 1.91% on Friday.
In Europe, investors drove the yield on the 10-year German government bond to an all-time low of 1.71%, before recovering to about 1.78%.
The drop in yields, which reflects an increase in prices, was driven by the intensifying debt crisis in Europe, analysts said. U.S. Treasuries and German government bonds are considered safe alternatives to more risky assets, such as stocks.
On Wall Street, the Dow Jones industrial average was down about 130 points in afternoon trading before a late rally pulled all three major indexes into positive territory.
Investors have been rattled by renewed concerns that Greece could default on its debts, despite new restructuring efforts announced Monday. In addition, reports said credit rating agency Moody's could downgrade French banks because of potential losses on their portfolios of Greek debt.
Greece has been struggling to restructure its crushing debt load as the nation's economy slips deeper into recession. The European Union proposed another bailout for Greece in July, but investors are worried that the latest installment of emergency money may not come in time to prevent Athens from missing some payments.
"If the investment markets are to be believed," said Kevin Giddis, director of fixed-income at Morgan Keegan. "It is no longer a question whether Greece will default on its debt, but how significant an impact a Greek default will have on the global economy, particularly in the eurozone."
Traders said the bid for U.S. Treasuries eased somewhat Monday after the government sold $32 billion in 3-year notes.
Demand for the offering was strong, despite a record-low yield of 0.33%. Investors submitted bids totaling more than $100 billion for the $32 billion in 3-year notes sold.
"We believe that demand at such low yield levels is sentiment-driven and subject to market perception of eurozone concerns," analysts at Nomura Securities wrote in a research report.
Monday's sale was the first in a series of three auctions this week totaling $66 billion in Treasuries.
On Tuesday, the U.S. will offer $21 billion in 10-year notes, followed by $13 billion in 30-year bonds on Wednesday.
Nomura analysts expect Tuesday's auction to be strong, but they warned that "any improvement in eurozone sentiment could cause a buyers strike at extreme yields."
Aside from the crisis in Europe, traders in the bond market were also looking ahead to economic reports this week on inflation, retail sales and manufacturing activity.
Economic indicators in the U.S. have been mixed recently, raising questions about the outlook for growth in the second half of the year.
As a result, investors have been searching for clues from the Federal Reserve on possible measures the central bank could use to stimulate activity.
Fed Chairman Ben Bernanke has been urging federal policymakers to avoid derailing the fragile economic recovery as they debate ways to close budget deficits and bring down long-term U.S. debt. He has said the Fed has "tools" available to help support the economy, but he has so far stopped short of naming which methods the bankers are considering.
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|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||3.92%||3.97%|
|15 yr fixed||3.00%||3.08%|
|30 yr refi||3.99%||4.02%|
|15 yr refi||3.10%||3.16%|
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