Yields on U.S. 30-year bonds fell to their lowest in more than nine months on Friday, sliding for a fourth straight session, as investors sought the safety of bonds after Russia unexpectedly raised rates hours after the S&P downgraded the country's credit rating.
The gap between short- and long-term interest rates, mainly the spread between yields of 5-year notes and 30-year bonds, also contracted on Friday to its narrowest since October 2009. Some strategists said this flattening of the yield curve could suggest the market sees the U.S. economy slowing.
For the short term, however, the focus has been on the tension between Russia and Ukraine.
Despite last week's peace agreement, violence in the eastern part of Ukraine and mounting Russian troop formations across the border have weighed on risk appetite and kept demand for German Bunds and Treasurys intact.
Compounding the flight to safety, Wall Street shares tumbled on weaker-than-expected results from bellwether names Amazon.com and Ford Motor.
As a result, yields on benchmark 10-year notes, which move inversely to bond prices, fell to a one-week low and are currently lodged on the low end of this month's trading range.
Investors grew anxious after Standard & Poor's on Friday cut Russia's credit rating to just one notch above junk status and warned more could follow if tighter sanctions were imposed and capital flight was not stemmed.