Better than oil, gold, or stocks, the best place for investors in 2011 was U.S. government debt. Not even a downgrade of the United States' AAA rating and spiralling public deficits stopped a rally in Treasuries, which were the best-performing asset class of the year.

Benchmark 10-year Treasuries returned nearly 17 percent in 2011, their largest gain since 2008. Other top performers such as gold and oil were set to finish the year with gains of 11 percent and 9 percent, respectively.

World stocks have lost more than 9 percent for the year, although a steady flow of encouraging U.S. economic data allowed the S&P 500 to get out of the red in the final weeks of December.

Growing fears about the euro-zone debt crisis, combined with a pledge by the U.S. Federal Reserve to keep interest rates low through 2013, made the appeal of Treasuries irresistible for investors.

Some, like PIMCO's Bill Gross, the manager of the world's largest bond fund, were forced to abandon heavy bets against U.S. government-related debt halfway into 2011 as it became clear the Treasuries rally was not going away any time soon.

We started the year with a 10-year yield of 3.30 percent and a nearly unanimous view that interest rates had nowhere to go but up, recalled Kevin Giddis, president of fixed income capital markets at Morgan Keegan in Memphis, Tennessee.

It looks like we will close the year with a 10-year yield in the neighbourhood of 1.88 percent and a nearly unanimous view that interest rates have nowhere to go but up, he added.

Yields on benchmark 10-year Treasuries were at 1.8745 percent on Friday, well below the psychologically important level of 2 percent.

Among other top-performing assets, U.S. crude oil prices were ending the year with gains of about 9 percent. Oil had a volatile session on Friday, however, with prices ranging from $98.61 to $100.16.

Gold prices traded at $1,566.90 an ounce on Friday, on track to rise about 10 percent in 2011, for its eleventh consecutive year of gains. The strong performance comes despite a sell-off in the last few weeks, when tight liquidity in the euro zone forced many investors to sell the metal to meet their financial obligations.

STOCKS, EURO LOSE

Worries about the fallout from the euro-zone debt crisis weighed on financial markets in 2011 and are expected to continue to pressure stocks and the euro into the new year.

The MSCI All-Country World index was poised to finish the year with losses of more than 9 percent, despite a gain of 0.4 percent on Friday.

On Wall Street, however, the Standard & Poor's 500 index was on track for a gain of about 0.2 percent for the year.

About two hours before Friday's close, the S&P 500 was down 1.58 points, or 0.13 percent, at 1,261.44, while the Dow Jones industrial average lost 33.42 points, or 0.27 percent, to 12,253.62. The Nasdaq Composite Index edged up 0.88 point, or 0.03 percent, to 2,614.62.

In Europe, the FTSEurofirst 300 index rose 0.87 percent on the day, trimming losses in the year to 10.8 percent.

The euro, threatened by a growing credit crisis in Europe, hit a 10-year low against the yen and is down about 3 percent against the dollar for 2011. On Friday, it was flat against the greenback at $1.295.

The euro has held up relatively well given the crisis we've seen, but that view is likely to come under pressure in the new year, said Simon Smith, economist at FXPro.

There is huge focus on what's going on in Europe. Next year is likely to be the year when either euro zone leaders send the region on a path toward greater fiscal integration or we see some of the more vulnerable countries having to leave.

(Additional reporting by Luciana Lopez, Emily Flitter and Chris Reese; Editing by Dan Grebler)