Treasurys posted steep gains on Monday, sending yields lower, after the White House said bankruptcy was a possibility for General Motors Corp. and Chrysler, prompting investors to seek safety in government debt. Yields on benchmark 10-year notes , which move inversely to bond prices, fell 7 basis points to 2.686%. Yields on two-year notes fell 4 basis points to 0.883, and those on 30-year bonds lost 7 basis points to 3.546%. On Wall Street, stocks fell sharply, with The Dow Jones Industrial Average was down 227 points, or 2.9%, at 7,549. Shares of GM were off more than 26% at $2.67. Worries for General Motors and Chrysler grew as the White House said a structured bankruptcy plan for the two automakers could give them their "best chance at success." The White House rejected viability plans the automakers submitted in response to requests for government loans. In addition, GM CEO Rick Wagoner was ousted, though it appears Chrysler CEO Bob Nardelli will escape the axe. Wagoner's successor, COO Fritz Henderson, wasn't warmly received. According to BMO Capital Markets analyst Jennifer Lee, global equity markets were also "extremely nervous" after comments over the weekend by Treasury Secretary Timothy Geithner, who among other things, couldn't say whether more bailout money would be available to help troubled banks. Last week, bonds fell amid concerns over the government's ability to find enough purchasers of its debt. But the fixed-income market remained supported as the Federal Reserve began to implement its "quantitative easing" plan to buy up to $300 billion in Treasury. "Quarter-end, and fiscal year-end in Japan are expected to also keep a bid in Treasuries, as is another Fed outright purchase that will include coupons ranging from August 2026 through February 2039," analysts at Action Economics said. Action Economics expects the Fed to buy another $7.5 billion in Treasurys, matching last week's purchases.

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