By Cynthia Lin Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--The benchmark 10-year U.S. Treasury yield sank to an all-time low of 1.659% early Wednesday in New York as fears about the euro-zone debt crisis intensified. The latest anxieties center around Spain's ability to support its banking system, piling on top of recent worries about Greece's future in the euro-zone bloc. This prompted global investors to seek out safer assets, pushing the 10-year yield below 1.672%, the previous low originally set in February 1946 and matched briefly last September. The European Central Bank signaled it would oppose any attempt to help fund the bailout of Bankia, Spain's third-largest lender by assets, via the central bank's lending facilities. While the country has pledge to rescue the bank, it comes at a time when its own finances are constrained due to its heavy debt load. Global investors didn't seem to take comfort in recent reports from the European Commission that the region's permanent rescue facility might be granted the ability to directly help fund struggling banks. "The reality this morning is that the ECB expressly rejected a unilateral idea from Spain that they inject bonds into Bankia, funded by the ECB," said Richard Gilhooly, interest-rate strategist at TD Securities. "The prospect of a further deterioration in the global economy intensifies amidst policy paralysis." Adding to the heap of euro-zone concerns, Italy drew only tepid interest at its bond sales, while a report showed business confidence in the region dwindling last month. The Italian government sold EUR5.732 billion of five-year and 10-year bonds, below the maximum targeted amount. In recent trading, benchmark 10-year notes rose 19/23 in price to yield 1.668%. Seven-year notes rose 13/32 to yield 1.106%, but had sunk to an all-time low yield of 1.102% at one point. The 30-year bond gained 1 14/32 to yield 2.772%. Bond prices move inversely to their yields. German bunds, considered their region's safe haven, were also on the receiving end of flight-to-safety flows. The two-year schatz yielded a new low of 0.009%, while the 10-year bund offered 1.308%. By contrast, the yield on Spanish 10-year bonds rose to 6.553% and Italian 10-year bonds to 5.895%. -By Cynthia Lin, Dow Jones Newswires; 212-416-4403; cynthia.lin@dowjones.com

Source