The benchmark 10-year Treasury note climbed in price by 05/32 to 102-03/32 for a yield of 3.997%, while the 2-year note was up 04/32 to 100-16/32 for a yield of 3.75%.
The Institute for Supply Management (ISM) August Manufacturing Index fell to 53.6 in August from 56.6 in July, after analysts had originally expected a rise to the 57.0 level. This disappointing news followed Wednesday's release of the Chicago purchasing management index (PMI), which showed a 49.2 reading for August that was sharply down from 63.5 in the previous month.
Meanwhile the damage from Hurricane Katrina also sparked investor speculation that the Federal Reserve might pause in its credit tightening program. The dollar index fell 71 cents to 86.85. Meanwhile the S&P stock index futures dropped 3.30 to 1218 and the NASDAQ 100 futures sank by 7.00 to 1577, creating some investor anxiety ahead of Friday's nonfarm payrolls report.