Bonds up as stocks falter and oil surges

Bond prices are on the rise as stocks slide into bear territory.

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NEW YORK (CNNMoney.com) -- Treasurys rose Friday, as stocks slid into bear territory and investors fled to the perceived safety of government bonds amid renewed pessimism about the economy.

The benchmark 10-year note rose 15/32 to 99 5/32, and its yield fell 0.07% to 3.96% Friday. The 30-year bond rose 1 10/32 to 97 21/32, and its yield dropped 0.09% to 4.51%.

The price on 2-year notes grew 1/32 to 100 14/32, and the yield declined 0.03% to 2.63%. Bond prices and yields move in opposite directions.

"We're really just wrapping up a week where poor performance in the credit and stock markets has people looking for safer investments," said Steve Van Order, chief fixed-income strategist at Calvert Funds. "It's been a parade of bad headlines, and bonds are looking better than they have in a long time."

After losing 358 points Thursday, the 30-share Dow Jones industrial average slipped briefly Friday afternoon into the technical definition of a bear market - shedding 20% from its most recent high in October 2007. It closed down more than 100 points, or 0.9%, according to early tallies, to end at a more than 21-month low. Oil prices surged to a record $142.93 a barrel Friday, settling at $140.21, and gold continued its rise above the $900 mark.

"With oil and gold going up, that is continuing to push down stock prices," said Jiang Peng, a portfolio manager at Smith Affiliated Capital. "Bond people are taking an increasingly recessionary outlook."

Consumer confidence sank to its third-lowest level ever in June, according to a study released Friday by Reuters and the University of Michigan. The drop offset the positive news from the U.S. Commerce Department report that personal spending and income had increased in May, Peng said.

"In this environment, bonds are a good place to park your money and see what happens next week," he said. "We'll probably see more negative news in the weeks to come as earnings reporting season comes under way."