NEW YORK - YIELDS on US government debt touched fresh lows again on Tuesday as investors, worried about the economy and the ongoing volatility in stocks, again sought out the safest investments.

Yields, which move opposite their price, fell to record lows on the 30-year long bond and the 10-year note.

Investors snapped up Treasurys because of fears that the nation's economic troubles would worsen.

Demand also rose for a second day after Federal Reserve Chairman Ben Bernanke said the central bank could become a buyer of Treasurys or other government debt, a move aimed at lowering long-term interest rates.

Lower long-term rates could reduce borrowing costs; a reduction in mortgage rates could, for example, draw out buyers and help the ailing housing market.

'What we saw today was more a function of continued concern about a really powerful recession,' said Mr Brian Matthews, managing principal at Payden & Rygel Investment Management in Los Angeles.

'Our expectation is that we're going to see more of this. In the longer-term context, this certainly is an aberration but in the reality of the current markets, this is going to be the norm for a while,' he said.

With demand so high, Treasurys can offer investors only minimal returns, but they do carry the reassurance of government-backed debt.

The two-year Treasury note rose 1/32 to 100 22/32, and yielded 0.89 per cent, down from 0.91 per cent late on Monday.

The 10-year note rose 8/32 to 109 4/32 and yielded 2.70 per cent, down from 2.73 per cent. The 30-year bond rose 7/32 to 124 29/32 and yielded 3.19 per cent.

The rate on the three-month Treasury bill, considered one of the safest investments, was unchanged at 0.05 per cent. The discount rate was 0.06 per cent.

Bank-to-bank lending rates slipped. The rate on three-month loans in dollars - known as the London Interbank Offered Rate, or Libor - fell to 2.21 per cent from 2.22 per cent, according to the British Bankers' Association.

The rates help determine the cost of loans for businesses and consumers. Rates have jumped in recent months as banks grew hesitant to lend for fear of not being repaid should a lender falter.

Some observers warned that some of the advance in Treasurys could have come too quickly and that the Fed's plans could hasten formation of another bubble.

'Treasury prices are now artificially high because someone is paying more than they are worth,' said Mr Rich Berg, chief executive of Performance Trust Capital Partners.

'The Fed is trying to force the market to do something that it wouldn't do on its own,' he said, referring to policymakers' efforts to lower down long-term rates.

'The Fed said we'll make them respond. 'We'll be a buyer that way they have to go down.''

He said the gains in Treasurys have been overdone.

'This is a major musical chairs with Treasurys,' he said.

'The last guy holding the chair is going to get hurt.'

Mr James D. King, chief investment officer at National Penn Investors Trust, said he expects the rally to continue in December but that it could fade after that.

'We'll probably continue to see strength in Treasurys through year-end. There are just overwhelming factors that are driving prices higher,' he said.

Mr King expects the rally will continue for now not only because portfolio managers don't want to end the year without holding 'the only game in town.'

'It's the only place that has been strong,' he said. -- AP