The economic pessimists are winning the argument in the U.S. Treasury bond market.

Yields on Treasury issues have fallen across the board Monday to their lowest levels in more than a year as some investors continue to seek a haven.

The 10-year T-note yield (charted below), a benchmark for mortgage rates, was at 3.04% at about noon PDT, down from 3.11% on Friday and the lowest since April 2009.

The two-year T-note was at 0.63%. That’s about half the yield investors were demanding as recently as April 5.

Traders say some investors are taking their cue from budget-cutting promises made over the weekend by the world’s wealthiest nations at the G-20 group summit. The biggest countries committed to slashing their budget deficits in half by 2013.

The more the industrialized nations talk about reducing spending, the greater the risk that the global economy tilts back toward recession and deflation. At least, that’s how new bond buyers see it, said Tom Di Galoma, head of U.S. rates trading at Guggenheim Partners in New York.

“This is carryover from the ‘double-dip,’ deflation outlook” that fueled heavy buying of Treasuries last week, Di Galoma said. The 10-year T-note yield was 3.24% a week ago.

Economist Paul Krugman has been leading the pack of analysts warning about the risk of sinking into a new morass if governments and central banks pull back on policies to boost the economy. “We are now, I fear, in the early stages of a third depression,” Krugman wrote in the New York Times over the weekend. The first two U.S. depressions were in the years following 1873 and in the 1930s.

The stock market wasn't buying the bond market’s grim message Monday. After slumping last week, stocks were up modestly with about an hour of trading to go. The Dow Jones industrials were up 42 points to 10,185.

Some of the fresh demand for Treasuries is tied to end-of-quarter book-juggling, as banks and other financial players look to bolster their balance sheets with liquid securities, traders say.

But buyers also must be betting that the raft of economic data this week won’t tell a story of a stronger recovery that could fuel a sudden snap-back in interest rates. A tepid report Monday on May consumer spending helped bolster the econ bears’ case.

On Friday the government will report on June employment trends. The private sector is estimated to have added a net 111,000 jobs this month, up from a dismal 41,000 in May, according to economist estimates tracked by Bloomberg News.

Di Galoma thinks the 10-year T-note yield will soon fall through 3%. Any backup in yields just brings out more buyers, he said.

-- Tom Petruno