Prices for Treasury securities jumped Thursday, sending the yield on the two-year note to a record low, as investors rushed to U.S. government debt in search of safety.
Stocks tumbled around the world on worries that the U.S. economy is weakening and that Europe's debt problems are getting worse. The Dow Jones industrial average fell 513 points, its biggest drop since December 2008.
The yield on the two-year Treasury note fell to 0.26 percent, a record low. Late Wednesday it was 0.34 percent. Bond yields fall when demand for them increases. That means traders are willing to accept smaller returns in exchange for investments they consider to be relatively stable.
The yield on the 10-year Treasury note fell to 2.39 percent, the lowest level since October. That's down from 2.62 percent late Wednesday. Its price jumped $2.06 for every $100 invested. The 10-year yield is used as a benchmark for many other interest rates. When it drops, rates on mortgage and other consumer loans usually follow suit.
The yield on the 30-year bond fell to 3.66 percent from 3.90 percent. Its price leapt $4.66 per $100 invested.
Investors are becoming more worried as bad news on the U.S. economy keeps coming in. Economic growth through the first six months of the year was far weaker than economists expected.
The U.S. economy grew at an annual rate of just 0.4 percent in the first three months of the year, according to revised figures released last week. Manufacturing grew in July at the weakest pace since 2009. And economists expect Friday's jobs report to show the unemployment rate remained stuck at 9.2 percent last month.
"Most of us thought that the economic weakness was transitory," said Kim Rupert, managing director of global fixed income at Action Economics. "But after some of the weakness in the July data that we've seen recently, that has just added to concerns that `transitory' is going to be longer than any of us expected."
Even if Friday's job report comes in better than economists expected, it may not be enough to end the worries, said Ward McCarthy, chief financial economist at Jefferies.
"When you look around the world, there aren't a lot of places that are offering encouragement," he said. "This is a global event."
European stock markets fell Thursday on worries that Italy or Spain may be the next country to need help from the European Union to pay its debts. Italy's main stock index fell 5.2 percent, and Spain's fell 3.9 percent.
"I can't tell you how many people I spoke to today that had that same, distant stare that I saw in the September to December 2008 period," William O'Donnell, head of U.S. Treasury strategy at RBS Securities, wrote in a report. "It's that peer-into-the-unknown look that's quizzical and confounded."
The yield on the three-month T-bill was unchanged at 0.01 percent. Its discount wasn't available.