Ben Bernanke acknowledged for the first time on Wednesday that credit concerns were spreading beyond the subprime mortgage market as investors showed their worries with a flight to quality, seeking refuge in government bonds and other safe assets.

Although the Federal Reserve chairman played down the likely effect on the US economy, declaring that financial conditions remained “generally favourable”, US Treasury yields fell sharply following the release of his testimony to Congress. Ten-year notes were yielding 5.02 per cent – 2 basis points down on the day – after dipping below 5 per cent.