Treasury yields near all-time lows

At 2.14% early Wednesday, the 10-year Treasury yield is not far from its record low close of 2.13% in December 2008.

NEW YORK (CNNMoney) -- The stomach-churning stock market roller coaster is ramping up demand for Treasuries, even after Standard & Poor's downgraded the United States on Friday.

Combine stock market volatility with the Federal Reserve's gloomy comments about the economy, and it's no surprise then that hunger for low-risk assets remains high.

As a result, the 10-year yield fell to 2.09% Wednesday afternoon, trading near its record low close of 2.06% last seen in December 2008.

A $24 billion auction of 10-year notes also drew solid demand, even at a 2.14% yield -- the lowest 10-year yield at auction, ever on record.

In uncertain times, investors typically flee risky assets such as stocks and pile into perceived safe havens, which -- even after the S&P downgrade -- include U.S. Treasuries.

"We don't think investors care much whether U.S. debt is rated AAA or AA+," Ron Muhlenkamp, president and portfolio manager of the Muhlenkamp Fund, said in a report to investors. "The U.S. Treasury market is still the largest and deepest market in the world, and the likelihood of getting the promised payments remains very high."

Bond yields tanked Tuesday, after the Federal Reserve said it views the economy as "considerably slower" than expected. In line with that gloomy outlook, the central bank said it plans to keep its key interest rate at an "exceptionally low" level until at least mid-2013.

"I have never in my 28 years of doing this seen such a long-term statement from the Federal Reserve," Kevin Giddis, president of Morgan Keegan's fixed income capital markets division, said in a note to investors. "The stage is set for some pretty tough sledding over the next few months and whatever confidence and momentum was created in the last year was pretty much wiped out."

A low federal funds rate is thought to encourage spending by making it cheaper for both consumers and businesses to borrow money.

But the low rate also signaled to investors that the Fed doesn't see inflation significantly affecting the economy for at least two years. That can make even record-low bond yields an attractive option, since at least bonds practically guarantee a return. Stocks -- especially in a low inflation environment -- offer no such guarantee.

In afternoon trading, the 2-year yield fell to 0.19%, slumping under its record-low close of 0.2% last week. The 5-year yield fell to 0.91%, also below it's recent record.

The only Treasury not near a record-low yield is the 30-year bond, which is trading around 3.49%.