Treasurys rose sharply Thursday, ending a week of declines following disappointing corporate reports and an unexpected jump in jobless claims.
The 10-year note rose for the first time since Dec. 8, gaining 31/32 to 99 3/32. That pushed its yield down to 3.48 percent from 3.60 percent late Wednesday, which was a four-month high.
Caution returned to the stock market after the Labor Department said new jobless claims rose 7,000 last week to 480,000. Economists polled by Thomson Reuters had been predicting claims to fall to 465,000. The dollar spiked to a three-month high against the euro, which further weakened stocks.
Typically investors will buy up government-backed bonds when they cut back on riskier investments like stocks. Major indexes fell 1 percent, including the Dow Jones industrial average, which lost 133 points.
Corporate news also rattled investors.
FedEx Corp. said its fiscal second-quarter profit tumbled 30 percent, and provided a tepid earnings outlook for the third quarter that fell well below analysts expectations.
After the market closed Wednesday, Citigroup Inc. priced a $17 billion stock offering at a steep discount, a troubling reminder investors aren't fully confident in the strength of the financial sector.
In other trading, the price of the 30-year bond surged 1 24/32 to 99 8/32. Its yield dropped to 4.42 percent from 4.53 percent.
The two-year note climbed 5/32 to 99 31/32, while its yield fell to 0.76 percent from 0.84 percent.
The yield on the three-month T-bill rose was unchanged at 0.03 percent. Its discount rate was 0.04 percent.
The cost of borrowing between banks fell slightly. The British Bankers' Association said the rate on three-month loans in dollars _ the London Interbank Offered Rate, or Libor _ decreased to 0.2534 from 0.2538 percent.