TREASURIES-U.S. 10-yr yields tumble as weak world stocks boost safe-havens

(Updates prices)

By Stefano Rebaudo

LONDON, Sept 20 - U.S. Treasury yields fell on Monday as default fears swirling around Chinese property developer Evergrande deepened a global equity selloff and sent investors scurrying to shelter in safe-haven bonds.

Shares in Evergrande slid as much as 19% to more than 11-year lows, adding to concern about the health of China's economy and the potential for contagion to other markets.

Evergrande has been scrambling to raise funds to pay its lenders, suppliers and investors, with regulators warning that its $305 billion of liabilities could spark broader risks to the financial system if not stabilised.

With world shares down 0.7%, Treasuries rallied, pushing 10-year yields 6 basis points lower to 1.31%, their biggest one-day fall in more than five weeks.

The 30-year Treasury bond yield dropped 6.4 bps to 1.845%.

The 10-year Treasury yield had already risen to two-month highs on Friday, as investors feared major central banks would start giving cues about tapering ahead of a busy week of policy meetings, which includes the Federal Reserve.

Analysts expect the Fed to open the door to reducing its monthly bond purchases while tying any actual change to U.S. job growth.

"The combination of a firmer U.S. dollar and U.S. Treasury yields near the top of the range is piling on the pressure on sentiment ahead of a possibly pivotal FOMC meeting this Wednesday," Saxo Bank's Chief Investment Officer, Steen Jakobsen, said in a note. (Reporting by Stefano Rebaudo, editing by Dhara Ranasinghe)

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