Treasury prices rose Thursday, sending their yields lower, as a spike in Spanish government bond yields brought new fears that Europe's debt crisis was spreading.
An afternoon slump on the stock market also led traders to park money in U.S. government debt. Treasury prices were lower earlier in the day following a sharp decline in applications for unemployment benefits.
The yield on the 10-year Treasury note was 1.97 percent in late trading, versus 2.01 percent late Wednesday. Its price rose 31.3 cents for every $100 invested.
Yields on Spanish bonds jumped to the highest level since 1997, a sign that investors are worried that the country will have trouble paying its debts.
Investors are worried that markets may lose confidence in the governments of larger European countries like Spain, Italy and France. Greece and Ireland, which are far smaller, were forced to seek bailouts after their own borrowing costs soared to unsustainable heights.
In other trading, the yield on the 30-year bond fell to 2.99 percent from 3.05 percent. Its price rose 90.6 cents.
The yield on the two-year Treasury note edged up to 0.27 percent from 0.26 percent.
The three-month T-bill paid a yield of 0.01 percent. Its discount wasn't available.