Worries about European debt fuel flighty to safety By Deborah Levine, MarketWatch NEW YORK (MarketWatch) — Long-term Treasury prices turned lower on Monday, pushing yields up, after Standard & Poor’s lowered its outlook on the U.S. government’s long-term AAA credit rating to negative from stable. Short-term debt stayed higher, though, as elections in Finland sparked worries about the euro zone’s ability to bail out Portugal and news reports indicated a Greek desire to consider restructuring its debt. Worries about the stability of debt markets in Europe sent investors in pursuit of the relatively safety of U.S. bonds. Yields on 10-year notes UST10Y +0.82% , which move inversely to prices, turned up by 3 basis points to 3.45%. A basis point is 1/100th of a percentage point. The yield have fallen to 3.36% earlier, its lowest point since March 24. Thirty-year bond yields UST30Y +1.50% jumped 5 basis points to 4.52%. Yields on 2-year notes UST2YR -5.74% stayed down by 4 basis points to 0.67%. The ability of short-term prices to hold their gains indicates investors aren’t worried about any real credit problem for the U.S. for at least a few years. Longer-term securities tend to be more sensitive to worries about the country’s long-term deficits, That increases the gap between shorter-and longer-dated yield, steepening the curve that charts their relationship. “The long-end is getting smoked and the curve is steepening on the news,” said Richard Gilhooly, director of rates strategy at TD Securities. He also noted that something similar played out in 1996, when the U.S was put on watch, then taken off once the debt ceiling was raised. Read more about S&P’s outlook on U.S. rating. Finland, Greece Bonds had been higher through the early U.S. session as worries about the Europe’s debt and economic outlook sparked interest in Treasury securities In Finland, a strong showing by the anti-euro True Finns party in Sunday’s national election raised fears that country could slow or even block a pending bailout for Portugal. Also, a Greek newspaper reported that Greece has asked the International Monetary Fund and the European Union to begin talks on restructuring its debt. Read about European debt, Greece. British gilts and German bunds also gained. “Treasurys are higher this morning, with gilts and bunds leading the way on worries about the fragile recovery in the U.K. and over Greek debt-restructuring rumors,” said RBS Securities strategists Bill O’Donnell and John Briggs in a note. Analysts also took note of key technical resistance around 3.4% in 10-year yields, which may hinder a further rally. In late-breaking news, a report on U.S. home builders’ confidence showed the National Association of Home builders index falling by a point to 16 in April, below expectations. Still to come in the day is a Federal Reserve buyback and speeches by a few Fed officials. Last week, Treasury bonds gained for the first week in four. See story on last week’s bond rally .

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