The U.S. Treasury market rallied Thursday after disappointing data on growth and jobs renewed concerns about the economy, leading investors to favor low-risk government bonds over stocks.
Adding to those worries were signs of unevenness in manufacturing, where a weak dollar has spurred export demand.
If that sector falters, it could make the economy contract, which last happened in the last quarter of 2007.
"Bonds are picking up here with the stock market leaking lower," said Steve Point, lead portfolio manager at Glenmede Investment Management in Philadelphia.
Bond gains were capped as the stock market pared earlier losses on a rebound in Nasdaq shares and a drop in oil near $124 a barrel.
The benchmark 10-year Treasury note's price, which moves inversely to its yield, was up 20/32 for a yield of 3.97 percent, the lowest in almost two weeks and down from 4.05 percent late Wednesday.
The two-year Treasury note was up 7/32 for a yield of 2.53 percent. down from 2.64 percent late Wednesday.
The government's initial reading on second-quarter gross domestic product, its broadest measure of economic activity, came in at an annualized 1.9 percent rate, faster than the 0.9 percent first-quarter pace but slower than the 2.0 percent median forecast of analysts surveyed by Reuters.
The fourth-quarter GDP figure showed a modest 0.2 percent contraction in the economy versus an earlier reported 0.6 percent growth. The government also downgraded its GDP readings from 2005 to 2007.