By Deborah Levine and Laura Mandaro, MarketWatch NEW YORK (MarketWatch) — Treasury prices rallied Thursday, sending 30-day yields to their biggest two-day drop since the depth of the financial crisis in late 2008, as global equities got hammered in reaction to the prior session’s Federal Reserve announcement and a round of weak global economic data. The longest-term debt sold by the U.S. got the biggest benefit from a surprise that the Fed would buy a huge chunk of the security’s supply over through June. Yields on the 10-year Treasury 10_YEAR -4.87% , which move inversely to prices, fell 9 basis points to 1.77%, setting a new record. Yields on the 30-year bond 30_YEAR -4.08% dropped 13 basis points to 2.86%, the lowest level since January 2009. Yields on the 2-year note 2_YEAR +4.46% were off 1 basis point to 0.19%. They jumped on Wednesday because the Fed said it would sell its holdings of debt maturing through three years. On Wednesday, the Fed warned of significant downside risks to its economic outlook and unveiled a $400 billion bond swap program to lengthen the average maturities of its portfolio. While the swap to longer-term debt was expected, equity investors around the world reacted to the Fed’s worsening outlook by selling stocks and shifting into the relative safety and liquidity of Treasury bonds. “Investors can’t get enough Treasurys,” said Larry Kantor, head of research at Barclays Capital. On Thursday, China and European data showed weakness in manufacturing and U.S. data showed jobless claims remained at a high level. Read about jobless claims. Stocks tumbled hard around the globe, hit by concerns over slower economic growth and reduced expectations that central banks would be able to revitalize activity. See story on U.S. stocks. “With Fed stimulus behind us, markets are once again looking forward — and not liking what they see,” noted Bill O’Donnell, head of Treasury strategy at RBS Securities. Treasurys often benefit from safe-haven demand as investors sell stocks and cyclical commodities. In addition, the Fed’s bond swap program increases demand for longer-maturity securities, and shifts demand away from the short end. The program, which was widely expected, is designed to reduced benchmark rates for consumer loans. U.S. stocks indexes tumbled more than 3%, with the Dow Jones Industrial Average DJIA -3.06% off more than 350 points. Gold futures GC1Z -4.18% fell $78 to $1,730 an ounce. Oil futures CL1X -5.21% dropped more than 5%. The dollar DXY +0.99% gained. Read about dollar, euro. Coming up, the Treasury will sell $11 billion in 10-year Treasury Inflation Protected Securities, or TIPS. See recent Treasury auctions. TIPS usually pay a coupon plus the rate of inflation over the maturity of the debt. However, yields on 10-year TIPS have turned slightly negative recently, and on Tuesday were at -0.02%. What that means is that investors are willing to buy the debt purely to receive the rate of inflation, which was recently seen by the TIPS market at around 1.89%. Shorter-dated TIPS rates, like 2-year and 5-year TIPS, have been negative for some time, which prompted government to say it would always give a very modest positive coupon on its debt.

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