U.S. Treasury yields fell on Tuesday as investors sought safety amid rising tensions in the Middle East.
The yield on the 10-year Treasury slid more than 6 basis points to 3.737%. The 2-year Treasury yield dropped over 4 basis points to trade at 3.61%.
Yields and prices move in opposite directions. One basis point equals 0.01%.
The Israel Defense Forces said on Tuesday that Iran was firing missiles at the country.
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Crude prices spiked higher on the news, along with gold futures.
Bond traders also weighed new data on the U.S. economy.
The Institute for Supply Management's manufacturing PMI came in at 47.2 for September. That's slightly below a Dow Jones forecast of 47.5.
Money Report
"U.S. manufacturing activity contracted again in September, and at the same rate compared to last month. Demand continues to be weak, output declined, and inputs stayed accommodative," Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee, said in a statement.
Investors also considered the outlook for interest rates as they digested comments from Powell.
On Monday, he indicated that if economic data remained consistent, two more rate cuts could come this year but in smaller, 25-basis-point increments. Powell also said that the recent 50-basis-point cut from the Fed should not be understood as a sign that the central bank will keep cutting rates aggressively.
"This is not a committee that feels like it's in a hurry to cut rates quickly," he said.
Powell also said the Fed was "not on any preset path" and that policy decisions would continue to be taken on a meeting my meeting basis.
