Treasury securities rallied Friday after the government reported good news on inflation.
The strength in bonds carried over into stocks. The dollar was mixed.
At 4 p.m., the price of the government's 30-year bond was up more than 1 point, cutting the yield to 5.89%, from 5.95%.
Ten-year notes rose 1/2 in price, reducing the yield to 5.29%, from 5.34%. Five-year notes rose more than 1/4, to yield 4.67%, from 4.73%. And two-year notes rose 1/4, to yield 3.79%, from 3.87%. The bond-equivalent yield on three-month bills was unchanged at 3.03%.
The Labor Department reported that the Producer Price Index fell 0.6% in August on the strength of a 25.6% drop in tobacco prices. Excluding tobacco, the PPI rose 0.2%. Economists had predicted a moderate increase but not a decline.
"The PPI grossly overstates the progress that has been made in fighting inflation," said John Lonski, senior economist at Moody's Investors Service. The report will not spark an easing of credit conditions by the Federal Reserve, he said.
Gold Down in N.Y.
"I think the Fed is still going under the impression that economic growth will pick up in the second half," Mr. Lonski said. "Investors have a less optimistic view of the economy than the Fed. That tends to support the bond market, despite the Fed's resistance to easing."
A fall in the price of gold -- a traditional gauge of inflation sentiment -- added to bullishness about bonds.
On the New York Commodities Exchange, the October gold futures contract finished at $350.70 an ounce, down $4.10.
The Dow Jones industrial average finished 32.14 points higher, at 3,621.63. The Standard & Poor's 500 index rose 4.22, to 461.72. And the Nasdaq composite index rose 6.59, to 744.30.
The dollar finished in New York at 1.5970 German marks, down from 1.5997, and at 106 yen, up from 105.30.