A pair of weak economic reports drove Treasury yields to record lows on Thursday.
The yield on the 10-year Treasury briefly dipped below 2 percent for the first time on record after a report from the Philadelphia Federal Reserve revealed a drop in manufacturing activity. The regional survey showed a steep fall in new orders, shipments and number of employees this month.
The Fed survey followed news that more people joined the unemployment line last week than at any time in the past month. The two reports added to worries that the economy could slide into another recession. The reports sent stocks falling sharply and sent investors in search of a safer place for their money. The Dow Jones industrial average fell 419.63 points, or 3.7 percent, to 10,990.58.
Dan Greenhaus, chief global strategist at the brokerage BTIG, called the Philadelphia Fed survey "an atrocious set of numbers." After the report was released, Treasury prices jumped, pushing yields lower. The yield on the 10-year Treasury ended the day at 2.06 percent, trading near lows reached in the depths of the 2008 financial crisis.
The price of the 10-year note rose 96.8 cents for every $100 invested, drawing the yield down from 2.16 percent late Wednesday. It briefly fell to 1.98 percent.
In other trading, the 30-year bond jumped $2.75, while its yield fell to 3.42 percent from 3.56 percent. The yield on the two year Treasury was unchanged at 0.19 percent.
The three-month Treasury bill paid a 0.01 percent yield. Its discount was 0.01 percent.
When Standard & Poor's downgraded the U.S. credit rating on Aug. 5, it was feared that demand for Treasurys would fall, because they were seen as riskier investments. However, with the plunge in stocks, investors have stepped up their buying of Treasurys, believing that they are still one of the safest places to put money. The higher demand has driven prices higher, and sent yields sharply lower.
The 10-year yield began the year at 3.29 percent.
The higher demand for Treasurys recalls the 2008 financial crisis, when investors were buying government debt as stocks plunged.
The Federal Reserve last week said it expected to keep short-term interest rates at their current low levels into 2013. That also is a factor in the drop in Treasury yields.
Treasurys are used as the basis for interest rates throughout the economy. The 10-year note is used to set the rates on loans including mortgages and commercial loans.
On Thursday, the mortgage company Freddie Mac reported that the average rate on a 30-year fixed mortgage has fallen to 4.15 percent. That's the lowest level on records dating back to 1971. A week ago, the rate was 4.32 percent.