U.S. Treasury debt prices rose Monday amid lingering concern over the deteriorating credit market, bolstering speculation of an emergency interest rate cut from the Federal Reserve.
A second month of declines in U.S. employment had already supported the view that the economy is in recession. Analysts say troubled markets could deepen the downturn and force further action from central banks.
With this multitude of factors discouraging investor appetite for risk, benchmark 10-year notes climbed 10/32 for a yield of 3.50 percent, down three basis points.
"What we're seeing is a certain flight to quality being driven by events within credit," said Joseph DiCenso, fixed-income strategist at Lehman Brothers.
Such events prompted Goldman Sachs to issue a research note saying it could not rule out an emergency Fed rate cut. The central bank has already slashed the target federal funds rate by 2.25 percentage points since mid-September to its current 3 percent.
Evidence of trouble came from many places. Carlyle Capital Corp, an affiliate of private equity firm Carlyle Group, said on Monday it has asked lenders for a standstill agreement as it faces more than $400 million in margin calls.
The firm said its lenders had significantly reduced the amount they were willing to lend against the company's portfolio of top-rated mortgage-backed debt due to the recent turmoil.
Elsewhere, private equity and real estate company Blackstone Group said challenging business conditions and a write-down of bond insurer FGIC led to lower fourth-quarter results.
All this as the head of Japan's financial regulator said global financial losses from the crisis have totaled $215 billion, with just over half coming from the United States.