The benchmark 10-year government note's price rose 1 point Friday, extending earlier gains, as the stock market came off the session highs it had reached on stronger oil prices and hopes of more aggressive rate cuts from the Federal Reserve.
The price on 10-year notes were up 1 point at 100-7/32. Their yield, which moves inversely with their price, was 3.48 percent, down from 3.59 percent late Thursday.
Treasury debt prices rallied after a large drop in non-farm payrolls confirmed fears of many investors that the economy continues to struggle and may be in the throes of a recession.
The drop in March payrolls, as well as revisions showing bigger drops in January and February, convinced many the Federal Reserve would continue to aggressively cut interest rates in an effort to stimulate the economy.
"The recessionary winds are hitting the economy with even greater force with the loss of jobs for a third month," said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.
Two-year notes were trading 4/32 higher in price for a yield of 1.86 percent from 1.92 percent.
Government data showed employers cut payrolls for the third consecutive month in March, slashing 80,000 jobs for the biggest monthly decline in five years. Economists on average had been looking for payrolls to fall by 60,000 last month.
"The downbeat labor report confirms why consumer confidence sank so deep this quarter and why the Fed will have to keep lowering interest rates at their future meetings," said Brian Fabbri, managing director of economic research at BNP Paribas in New York.
Federal fund futures point to about a 38 percent chance the central bank will cut its recommended overnight lending rate between banks by 0.50 percentage points at a policy meeting later this month.
The benchmark rate now stands at 2.25 percent. The Fed has aggressively cut rates by 3 percentage points since September as a global credit crisis has hobbled the economy.
While bonds benefited Friday as investors bought government debt in an effort to find a safe-haven investment, stocks initially fell on the jobs news but later recovered to trade near unchanged.
"People are pulling money out of stocks and putting it into bonds because the economy is weaker than they had thought and corporate earnings will be affected," said Lee Olver, fixed-income strategist at SMH Capital in Houston.
Five-year notes were trading 16/32 higher in price for a yield of 2.64 percent from 2.75 percent late Thursday.
Meanwhile, 30-year bonds were trading 1-4/32 higher for a yield of 4.32 percent from 4.39 percent.