Bonds spike as stocks sink

NEW YORK (CNNMoney.com) -- Bond prices rallied Tuesday amid a sharp decline on Wall Street that saw the blue-chip Dow Jones industrial average shed more than 400 points.

The dollar sank against the euro and the yen.

The benchmark 10-year note climbed 30/32, or $9.38 on a $1,000 note, to yield 4.51 percent, down from 4.63 late Monday.

The 30-year bond surged 1-15/32, or $14.69 on a $1,000 bond, to yield 4.64 percent, down from 4.73 in the previous session. Bond prices and yields move in opposite directions.

The five-year note climbed 22/32 to yield 4.46 percent, while the two-year note soared 10/32 to yield 4.59 percent.

Treasury prices increased as investors fled stocks and sought the safe-haven of government bonds.

U.S. stocks plunged Tuesday, sparked by worries of a slowdown in China and the U.S. economy. The Dow, broader S&P 500 and Nasdaq each fell more than 3 percent during the session.

Adding to concerns about weakness in the economy was a government report that said new orders for U.S.-made durable goods fell sharply in January.

Orders for items meant to last three years or more sank 7.8 percent, and orders for nondefense goods posted their biggest monthly decline ever, according to Reuters.

Economists surveyed by Briefing.com expected the report to show a decline of 3 percent after posting a 2.8 percent gain in December.

The volatile report is the latest in a string of readings to raise concerns about the health of the economy.

Last week a report showed the default risk for mortgages given to borrowers with weak credit histories is rising, and on Monday former Federal Reserve Chairman Alan Greenspan said the U.S. economy may fall into a recession by the end of the year.

In currency trading, the euro bought $1.3245, up from $1.3187 late Monday. The dollar bought ¥117.92, down from ¥120.55 the previous session.

Wall Street braces for a slide