The 30-year bond yield fell to 5.15 per cent - not far from the record low of 5.13 per cent reached the previous week. "By the end of next year, the long bond yield will be a full percentage point lower," said Thomas Carpenter at ASB Capital Management. "My guess is that we'll see deflation" as Asia's economic slowdown spreads to the US, he said.
US stocks rose four days out of five last week as gains in telephone, tobacco and beverage shares offset declines in companies whose fortunes depend on a growing economy.
"There is a move to security and safety," said David Bayer at Knappenberger Bayer Management.
The Dow Jones Industrial Average rose 1.28 per cent to 7,895.66. It marked the first time since June that the Dow average managed four days of gains in a week. The S&P 500 rose 1.1 per cent and the Nasdaq Composite 1.4 per cent.
The Dow "is down about 15 per cent from its highs, and some people are thinking that while valuations aren't cheap, they are the cheapest they have been for some time," said Ted Bridges at Bridges Investment Counsel.
Traders attributed a late-day rise on Friday to the simultaneous expiration of futures and options on US stock indices and options on individual stocks.
"It's an expiration rally," said Peter Coolidge at Brean Murray. "I wouldn't read too much into it."
Thirty-year Treasury yields have tumbled about 90 basis points since April as investors sought the world's safest securities while global economies faltered and stocks fell.
So far this year, 30-year bonds have handed investors returns of more than 15 per cent. That compares to a gain of 1 per cent for the Dow.
Investors snapped up shares in telephone and tobacco companies, which tend to perform relatively well during economic declines. Cyclical stocks such as Dow Chemical Co, which perform best in times of economic growth, declined.
Some investors were reluctant to buy ahead of a weekend because of the precarious financial condition of Japan and Latin America. Also, many Wall Street traders and investors will observe the Jewish holidays on Monday and Tuesday.