Treasury prices rose sharply Tuesday, after homebuilder Lennar reported a big loss and a national report showed existing home sales at a five-year low in August.
Signs of economic weakness stir demand for government-backed Treasurys.
On Tuesday prospects for economic growth looked poor after Lennar reported an unexpectedly large loss and prominent retailers Target and Lowe's cut their sales forecasts.
In addition, the National Association of Realtors said existing home sales dropped 4.3 percent to 5.50 million units in August, marking the weakest sales since August, 2002. Inventories of unsold were 4.58 million, the highest level since May, 1989.
The sense that the economy remains fragile was reinforced by a Conference Board report that consumer confidence slipped to a reading of 99.8 this month, the lowest level in almost two years.
The benchmark 10-year Treasury note rose 10/32 to 101 8/32 with a yield of 4.59 percent, down from 4.62 percent late Monday. Prices and yields move in opposite directions.
The 30-year bond climbed 13/32 to 102 7/32 with a 4.86 percent yield, down from 4.87 percent late Monday.
The 2-year note gained 4/32 to 100 1/32 with a 3.96 percent yield, down from 4.05 percent at Monday's close.
In recent weeks, Treasurys have tended to trade in the reverse direction of stocks, as investors switch back and forth between low- and high-risk assets in response to shifting views about the economy and the rates outlook.
The Federal Reserve cut the Fed funds rate by a half percentage point a week ago, and issued a statement that highlighted worries about the housing market and contraction in the credit markets.
"With the dour news, we will be reminded why the Federal Reserve lowered the Fed funds rate as much as it did and all of those who complained about the size of the cut will be quiet today," said Tony Crescenzi, chief bond market strategist at Miller Tabak.
Since the rate cut, fixed-income investors have been devising purchasing and selling strategies around the so-called yield curve, which measures the distance between the yields on short- and long-term instruments.
Treasury market plays that stretch out the distance between the yields of the short-term 2-year note and those of the longer-term 10-year note and 30-year bond are known as "curve steepeners." They amount to bets that the Fed will cut interest rates further in coming weeks.
The curve steepening plays were back in the market on Tuesday, as the concerns about global weakness and further contraction for the housing sector reinforced the view that there are more rate reductions to come.