Worries about a recession in Europe boosted demand for U.S. Treasurys, leading to a blockbuster auction of 10-year notes.
The U.S. government sold $21 billion of 10-year notes at a yield of 1.9 percent. It was the lowest yield on record for a 10-year note auction. Demand was high, outpacing supply by 3.23 times, compared to an average of 3.09 in the last eight auctions.
The benchmark 10-year Treasury rose 53 cents for every $100 invested. Its yield fell to 1.91 percent from 1.97 percent late Tuesday.
Traders' worries spiked after Germany reported that its economy contracted slightly at the end of 2011. The European Union also revised its figures for economic growth in the third quarter to 0.1 percent, its slowest pace in more than two years.
"The prospect of recession even in Germany, which is the engine of Europe, is worrying," said Bill O'Donnell, strategist at RBS Global Banking & Markets.
The 30-year bond rose $1.12 per $100. Its yield fell to 2.97 percent from 3.03 percent late Tuesday. The yield on the two-year note fell to 0.23 percent, from 0.26 percent.
The 10-year auction was the second of three debt auctions from the Treasury totaling $66 billion this week. The government is scheduled to auction $13 billion in 30-year bonds Thursday.
In the market for short-term Treasury bills, the three-month T-bill paid a 0.02 percent yield.