The 30-year benchmark Treasury issue at around 3 p.m. in late U.S. traded up 24/32 in price as the yield, which moves in the opposite direction, dropped to 5.28 percent.

That new all-time low yield in the 21-year history of the long bond sparked concern of worldwide deflation and raised the possibility that the U.S. Federal Reserve may now move to lower interest rates.

Activity was brisk, and early in the day the bond didn't get much of a lift from a midday drop in the Dow Jones industrial average. The Dow later accelerated its losses, which caused investors to then flee into bonds.

By late in the day, the Dow had more than erased its gains for all of 1998.

The bond market got a brief late-morning boost after a report showed new-home sales in July were far below economist expectations, despite low interest rates and rising wages.

On the political front, the Russian Duma voted against President Boris Yeltsin's nomination of Victor Chernomyrdin as the country's new prime minister.

President Clinton is scheduled to meet with Russian officials as part of a summit this week. Leadership concerns in Russia, a recent default on some of its debt, and a move to let the ruble float lower against the dollar sent stocks there and elsewhere into a tailspin.

The German mark, which has been wavering in recent weeks in response to the Russian ills, was slightly higher against the dollar. The mark -- which has moved because of Germany's big investments in Russia -- recently traded at 1.7657 to the dollar.

But the Japanese yen made a late-day run against the dollar as Wall Street continued to suffer, trading up 1.27 at 140.68 to the dollar.