Even if those estimates prove accurate, yields would still hold below their average of 3.19 percent in 2010, data compiled by Bloomberg show. That would help the administration of U.S. President Barack Obama finance a $1.3 trillion budget deficit. Interest expense on U.S. debt totaled 2.7 percent of gross domestic product in fiscal 2011 ended Sept. 30.
'Breaking Point?'
The economy is "not strong enough to generate a big move up in yields given the fear that's out there," said Roth at Mitsubishi UFJ.
Macroeconomic Advisers LLC cut its estimate on Dec. 2 for U.S. growth in the first half of 2012 to 1.9 percent, from 2.2 percent a month earlier, citing the negative "spillover" effects of the euro zone crisis.
"We have a financial and banking crisis in the euro zone," Lawrence Meyer, a senior managing director in Washington at Macroeconomic Advisers and a former Fed governor, said in a telephone interview on Dec. 6. "The questions now are 'Will it get worse?' 'How much worse?' and 'Will it get to a breaking point?'"
European bank demand for dollars remains about the highest since October 2008 even after central banks reduced the cost of emergency funds by half a percentage point on Nov. 30.
The three-month cross-currency basis swap, the rate banks pay to convert euro payments into dollars, was 122 basis points to 126 basis points below the euro interbank offered rate in London. That's the most expensive since Dec. 5. The cost rose on Dec. 9 on concern the measures won't stem the region's debt crisis.
"The longer that Europe muddles, the more people will fear you'll have some sort of disorderly breakdown," Thomas Girard, a bond fund manager in a group with $115 billion in assets at New York Life Investment Management in New York, said in a Dec. 7 telephone interview.
The risks range from bank failures to a country leaving the euro currency, he said. "All of those things have the effect of putting downward pressure on Treasury yields."