Weak U.S. economic data and uncertainty about Greece's debt crisis lit up demand for safe investments Tuesday, pushing the benchmark 10-year Treasury yield to its lowest close in nearly four months.
The yield on the five-year Treasury note hit a record low for the second straight day, falling to 0.70 percent.
International lenders postponed a meeting with Greek officials about reducing that nation's employment costs. Greece also needs banks and hedge funds that own its bonds to wipe out some of its debt.
Greece must accomplish both goals to obtain its next round of bailout money from the International Monetary Fund, European Central Bank and European Commission. Without the bailout, Greece probably can't pay its bills.
Traders fear that a default by Greece will spook lenders to other debt-saddled European nations and cause a wave of defaults. Portugal's borrowing costs hovered near record highs on Tuesday, a sign of investors' wariness.
Bad news about the U.S. economy sapped demand for higher-risk investments such as stocks, further lifting Treasurys. The Conference Board said that its index of consumer confidence fell to 61.1 in January from 64.8 in December. Economists had expected a rise to 68.
Home prices fell in November for a third straight month in 19 of the 20 cities tracked by the S&P/Case-Shiller index.
The reports reminded traders that the economic recovery remains slow and halting, despite the stock market's strong gains so far this year. They pared their riskier holdings and poured money into safe investments such as dollars, German bunds and Treasurys.
As demand for Treasurys increases, their yields fall. That means traders are willing to accept an even tinier return in exchange for holding an asset that carries almost no risk.
The price of the 10-year Treasury note rose 44 cents for every $100 invested. Its yield fell to 1.795 percent as of 4:10 Eastern time, from 1.85 percent late Monday. It had fallen earlier as low as 1.787 percent.
The benchmark 10-year yield hasn't settled at such a low level since Oct. 3, when it closed at 1.76 percent. Days earlier, the Federal Reserve had announced a round of bond-buying aimed at reducing long-term borrowing rates. Interest rates on many consumer and business loans are pegged to the 10-year yield.
Bond-buying by the Fed tends to make Treasurys more attractive. Traders buy up the securities before the Fed enters the market, then sell them at a profit after the Fed's buying boosts prices further.
Speculation about further bond-buying by the Fed has pushed Treasury yields lower since last week. The Fed said that it plans to keep interest rates very low through late 2012 to encourage lending and investment. The move highlighted the Fed's dim outlook for inflation and growth.
Low inflation makes Treasurys more attractive by preserving the buying power of traders' small, fixed returns. Weak growth also adds to demand for safe investments.
The price of the 30-year Treasury bond rose $1.22 for every $100 invested, pushing its yield down to 2.94 percent from 3.01 percent late Monday.
The yield on the two-year Treasury note was unchanged at 0.22 percent. The yield on the three-month Treasury bill was flat at 0.05 percent.
Follow Daniel Wagner at www.twitter.com/wagnerreports.