Treasurys rose Friday with yields falling to their lowest levels since 2004, prompted by renewed fears of a recession and growing certainty of a hefty interest rate cut this month from the Federal Reserve.
Investors also sought the relative safety of U.S. government debt, as stocks snapped a two-day rally on a report saying Merrill Lynch would record a $15 billion write-down of mortgage assets and as credit card companies warned of mounting loan losses.
Major U.S. stock indexes were broadly lower with the Dow Jones Industrial average losing more than 250 points or 2 percent.
"The (stock) market is running out of bullets for support," said George Goncalves, chief Treasury/TIPS and agency strategist with Morgan Stanley in New York.
The yield on two-year notes , which responds closely to expectations for moves in official interest rates, slipped to 2.60 percent, its lowest level since November 2004.
Benchmark 10-year yield fell to 3.82 percent, its lowest since March 2004, from 3.89 percent late Thursday and 3.88 percent a week ago.