The 10-year note rose 04/32 to 99-06/32 for a yield of 4.35%, while the 30-year bond climbed 12/32 to 111-30/32 for a yield of 4.57%.
Also, investors fled to safety as stocks dropped sharply.
Inventory reports for the week of Sept. 30 by the US Department of Energy showed unexpected draws of 0.25 million per barrel for crude, 4.4 million per barrel for motor gasoline and 5.5 million for distillates. Analysts had been expecting a crude build of 4.5 million per barrel, and draws of 3 million per barrel and 2 million per barrel for gasoline and distillates, respectively.
The Institute for Supply Management said that September business activity dropped to 53.3% from August's 65%, indicating a slower rate of growth activity in September. The last time the index was this low was when it registered 52.6% in April 2003. Many ISM members' comments expressed concern about the continuing increase in oil & gas prices as well as Hurricane Katrina, and their impact on prices and economic activity.