The yield on the 10-year Treasury note fell to 2.35 percent from 2.57 percent late Friday. A bond's yield drops when its price rises. The 10-year note's yield fell as low as 2.06 percent in 2008.

“Other AAA-rated sovereign debt issues are arguably in worse condition than the United States,” said Bill Stone, chief investment strategist for PNC Financial. He pointed to the AAA-rated United Kingdom and France. Relative to the size of their economies, both have higher debt loads than the United States. The dollar's status as the reserve currency for the world also helps keep investors coming back to Treasurys.


Monday was the first chance for global investors to respond to S&P's announcement late Friday that it was reducing its credit rating for long-term U.S. government debt by one notch, from AAA, the highest rating, to AA+.

The move wasn't a total surprise but came when investors were already feeling nervous about a weak U.S. economy, European debt problems and Japan's recovery from its March earthquake.

Fresh memories of the financial crisis three years ago are also driving investors away from risky investments and into what's considered safer.

“Fear of a repeat of 2008 is what's really driving investments,” said Gary Schlossberg, senior economist with Wells Capital Management.

In other trading on Wall Street, the S&P 500 index fell 60 points, or 5 percent to 1,139. The Nasdaq composite index fell 126 points, or 5 percent, to 2,407. The Dow was at 11,009, down 3.8 percent.

Last week, the Dow Jones industrial average fell almost 700 points. That was its biggest point loss since October 2008, during the financial crisis. The Dow has dropped in nine of the last 11 trading days.

The S&P 500 is already down 11 percent so far in August. If it stays down just that much, it would be the worst month for the index since October 2008.

Stock markets in Asia began the global rout. The main stock index fell almost 4 percent in South Korea and more than 2 percent in Japan. European markets opened later and fell, too, with Germany down 5 percent and France 4.7 percent.

Gold, considered to be a safe investment, rose more than $70 per ounce, to $1,721. Monday was the first time gold was above $1,700 although after adjusting for inflation, its price remains below its 1980 record. At that time an ounce cost about $2,400 in today's dollars.

Gold began the year at $1,421.40. It has climbed steadily as worries rose about high debt levels in both Europe and the United States. It went above $1,500 per ounce in late May.

Moody's, another of the other key credit-rating agencies, on Monday stood by its top Aaa rating for the United States. It said it could downgrade the U.S. if it doesn't improve its long-term finances by cutting its deficit, “but it is early to conclude that such measures will not be forthcoming.”

Standard & Poor's also on Monday downgraded the credit ratings of mortgage lenders Fannie Mae, Freddie Mac and other agencies linked to long-term U.S. debt. Fannie and Freddie own or guarantee about half of all U.S. mortgages. Their downgrade could mean higher mortgage rates for consumers.

Worries about weaker profits that could result from a slowing economy have slammed the financial industry since late July. As a group, financial stocks in the S&P 500 index fell 4.9 percent on Monday to their lowest level since July 2009.

Bank of America Corp. has been the hardest hit. It fell 13.7 percent after AIG filed suit against the bank. The insurer alleged Bank of America sold it overvalued mortgage-backed securities. The bank denied the allegations. Its stock has dropped by nearly 50 percent this year.

Stocks in other industries whose profits are closely tied to the strength of the economy also fell sharply. Energy stocks in the S&P 500 fell 4 percent, for example.