Treasuries rose and three-month bill yields fell below 3 percent for the first time since August as concern over banks’ willingness to lend drove investors to the relative safety of U.S. government debt.

The interest rate that banks charge each other for borrowing in dollars for one month rose the most in more than a decade as banks sought to cover their commitments through the start of 2008. Yields on notes fell as futures traders increased bets that the Federal Reserve will cut borrowing costs a half- percentage point next month to prevent a recession. [MORE]