NEW YORK (CNN/Money) - U.S. Treasury yields struck four-decade lows for a second straight session on Wednesday as safe-haven flows helped balance not only a bounce in stocks but upbeat U.S. auto data as well.

Around 3:30 p.m. ET, 10-year notes were up 3/32 to 103-14/32 after jumping nearly 1-1/2 points on Tuesday. Their yields dipped to 3.95 percent from 3.96 percent, flirting with 40-year lows.

Five-year notes advanced 1/32 to 101-5/32, also leaving yields at historic closing lows of 3.00 percent.

At the long end, the 30-year bond rose 10/32 to 108-30/32, pushing its yield to a 10-month trough of 4.79 percent from 4.82 percent. Two-year notes were alone in easing 1/32 to 100-7/32, yielding 2.00 percent from 1.98 percent Tuesday.

Bonds were supported by foreign demand, particularly from Japan, and buying by mortgage managers hedging against prepayment risk. Rumors of security scares and more U.S. saber rattling over Iraq also maintained the safe haven allure of fixed income debt.

That countered a moderate rally in stocks where the major indexes regaining about a quarter of Tuesday's steep losses.

And it helped draw the sting of stunningly strong U.S. auto sales figures which set private consumption on course for growth of at least 4.0 percent in the third quarter.

Indeed, while much has been made of the risk of a double-dip recession, the resilience of consumption means many analysts will be revising up their forecasts for gross domestic product and penciling in growth of 3.0 percent or more in the third quarter.

Such a healthy outlook would seem to sit at odds with yields at historic lows, but investors are not so much impressed by the quantity of growth as they are worried about its quality.

"The problem is that growth is too reliant on the consumer and the bond market is betting they can't keep spending like this forever," said Ifty Islam, head of U.S. fixed income strategy at Deutsche Bank Securities.

For now, consumption had been sustained by a combination of decent income growth, deep sale discounts particularly in autos and lower interest costs from the wave of mortgage refinancing.

"The question is how long can this be sustained, especially if the labor market weakens further as we expect," said Islam, adding that Deutsche was looking for nonfarm payrolls to fall 25,000 in August.

The payrolls report is due Friday and on average analysts expect a rise of 37,000 after a meager 6,000 gain in July.

"That's one reason we think yields can keep falling -- our target for the 10-year is 3.75 percent," Islam said, adding that Deutsche also looked for Fed funds at 1.25 percent by year-end from the current 1.75 percent.

In the currency market, the dollar climbed back from the previous session's steep losses against the euro and the yen, helped by indications of a respite for Wall Street after a battering in the wake of weak manufacturing data.

Around 3:30 p.m. ET, the euro bought 99.14 cents, down from 99.64 cents Tuesday. The dollar purchased ¥117.98, up from ¥117.08 at Tuesday's close.

The dollar shed around one percent against the euro and the yen on Tuesday, falling close to parity with the single European currency for the first time since late July, and dipping to its lowest in over two weeks against the yen.

"Wall Street is the next issue. People will be looking for a positive opening and if a recovery is sustained during the day then the dollar will hold on -- but we are hostage to equities," said Mark Austin, chief currency strategist at HSBC.  

-- from staff and wire reports