* Benchmark yields hit nearly 2-week low
* Long-dated yields at near 1-week low
* Mainland Chinese shares fall 7 pct, fueling safety bids
* Saudi Arabia and Iran tensions support Treasuries
By Sam Forgione
NEW YORK, Jan 4 (Reuters) - U.S. Treasury yields fell on Monday, with benchmark yields hitting nearly two-week lows after a tumble in Chinese shares fueled worries over global growth and drove demand for safe-haven U.S. government debt.
Mainland Chinese shares fell 7 percent, triggering a new circuit breaker that prompted a trading halt, after surveys showed factory activity in the world's second-largest economy shrank sharply in December.
Yields on benchmark 10-year Treasury notes hit 2.200 percent, their lowest since Dec. 22. Yields on Treasuries maturing between five and seven years also hit nearly two-week lows, while 30-year yields hit their lowest in nearly a week, at 2.941 percent.
Analysts also said a deterioration in relations between leading crude producers Saudi Arabia and Iran stoked demand for safe-haven Treasuries. Saudi Arabia cut diplomatic ties with Iran on Sunday in response to the storming of its embassy in Tehran.
The combination of the Chinese equity market sell-off and the deterioration of relations between Iran and Saudi Arabia "has really accentuated the risk-off feel," said John Briggs, head of strategy for the Americas at RBS in Stamford, Connecticut.
On Wall Street, the benchmark S&P 500 stock index was last down more than 2 percent.
Despite the risk aversion, analysts said traders were not growing more skeptical that the Federal Reserve would have to slow the pace of its rate increases. They said short-dated Treasury yields would have fallen more if traders were taking that view.
Three-year yields hit their lowest level in nearly three weeks at 1.266 percent, while two-year yields hit their lowest in over a week, at 1.008 percent.
The tensions between Saudi Arabia and Iran will result in oil prices becoming more unpredictable, which will likely affect other asset classes, including bonds, said Sharon Stark, chief fixed income strategist at D.A. Davidson & Co. in St. Petersburg, Florida.
Data showing U.S. construction spending fell for the first time in nearly 1-1/2 years in November also supported Treasuries prices.
Benchmark 10-year Treasury notes were last up 17/32 in price to yield 2.214 percent, from a yield of 2.275 percent late Thursday.
U.S. 30-year Treasuries prices were last up 1-5/32 to yield 2.953 percent, from a yield of 3.013 percent late Thursday. Two-year notes were last up 2/32 in price to yield 1.024 percent, from a yield of 1.064 percent late Thursday.
(Reporting by Sam Forgione; Editing by Dan Grebler)