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Treasurys stay up as investors eye Spain

NEW YORK (MarketWatch) -- Treasury prices stayed up Monday as investors pondered whether European Union leaders are moving closer to resolving the region's debt crisis.

Yields on 10-year notes(10_YEAR) , which move inversely to prices, fell 1 basis point to 1.56%.

A basis point is one one-hundredth of a percentage point.

Yields on 5-year debt (5_YEAR) declined 3 basis points to 0.64%.

Thirty-year yields (30_YEAR) fell 1 basis point to 2.65%.

On Friday, yields on the benchmark 10-year note hit a 4-week high of 1.57%, buoyed by a stronger-than-expected jobs report and data that the services sector was seeing signs of improvement.

The markets also reassessed European Central Bank President Mario Draghi's statements from Thursday, when he said that governments must stand ready to activate the rescue fund but refrained from announcing more concrete measures.

"European policy makers have made some progress toward stabilizing the region, but there are still many points of contention among stakeholders and the path forward remains clouded," Bill Stone, chief investment strategist for PNC Asset Management Group, said in a note to clients.

"I would like to see some evidence that they have their arms around the crisis over there, but that's not going to happen in one fell swoop," said David Coard, head of fixed income sales at The Williams Capital Group. He noted that with many people on vacation, volumes are lighter and it doesn't take much to move the markets these days.

Spanish Prime Minister Mariano Rajoy said Friday he will do what is best for the country, but needed to know what the conditions would be for any potential financial aid before making a decision. Germany remains opposed to the central bank purchasing bonds of debt-ridden countries.

"We believe it will be difficult for growth to pick up appreciably until U.S. policy makers address the 'fiscal cliff' and European policy makers make additional progress toward stabilizing the euro zone," Stone said.

"There's some concern about the fiscal cliff, but it's not at the forefront," Coard said. "[Investors] are still concerned about the uncertainty in Europe, and there's a preoccupation with liquidity and safety. It's very hard to forecast markets that are being driven by emotion."