(Recasts first paragraph, adds analyst quote)
By Kate Duguid
NEW YORK, Oct 2 (Reuters) - U.S. Treasury prices rose on Tuesday after an Italian lawmaker cast doubt over Italy's membership in the euro, resulting in a sell-off in Italian government debt which sent investors seeking safe-haven bets.
Italian 10-year bond yields soared to a new 4-1/2-year high early on Tuesday after Italian lawmaker Claudio Borghi, economic head of the League party, said most of the country's problems would be solved by ditching the single currency, even as the government attempted to backtrack.
Yields at the long end of the U.S. curve were down as much as 3 basis points after Italy defied pressure from Brussels and its euro zone partners to water down ambitious budget plans, threatening to sue EU officials it said were to blame for a deepening sell-off in Rome's financial markets.
The U.S. 10-year yield was last at 3.052 percent and the 30-year bond yield was at 3.206 percent. The move erased a rise in U.S. yields on Monday following the negotiation of a trilateral free-trade pact between the United States, Canada and Mexico.
"The modest flight to quality flow resulting from the wider than expected budget deficit target out of Rome looks set to continue as 10-year Italian spreads to bunds broke 300 bp, a level not seen since late May," said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.
The risk-off sentiment was evident in the fall in yields on German bunds, with the 10-year benchmark government yield down 3.5 basis points on Tuesday.
U.S. and EU equities fell as appetite for risk decreased, with bank stocks dragging the most, and the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all opening lower.
Though turmoil in Italy may continue to send investors to the Treasury market, a deluge of new corporate bond issues was expected to put upward pressure on yields. Traders estimated this week will see more than $40 billion in new issuance.
"There's a lot of investment-grade supply - the Comcast deal is probably going to price today. It's definitely weighing on the market, definitely affected the long end," said Justin Lederer, Treasury analyst and trader at Cantor Fitzgerald.
Comcast Corp announced an up to 12-part U.S. dollar benchmark bond on Tuesday as it looks to fund its $40 billion takeover of British pay TV company Sky.
The company is approaching investors with maturities from two up to 40 years both in fixed and floating-rate format. Investors are expecting a deal of at least $20 billion or more.
Federal Reserve Chair Jerome Powell will speak at 12:45 p.m. ET (16:45 GMT), though he is not expected to say anything markedly different from his statement following the Federal Open Markets Committee meeting last week. (Reporting by Kate Duguid; Editing by Meredith Mazzilli and Jonathan Oatis)