What's bad for stocks today is good for bonds. The bond market is rallying this morning as investors look for safer investments amid weakness in equity markets.

The benchmark 10-year

Treasury note was lately up 6/32 at 100 23/32, pushing its yield down to 5.652%. That puts the government security at its lowest yield of the year.

Bonds have pared back some of their gains from earlier in the morning as the

Dow Jones Industrial Average rebounded off its lows of the day and the

Nasdaq moved into positive territory.

The bond market is clearly much more concerned with the weak performance of the stock market and its implications for lower interest rates than it is with the growing signs of inflationary pressure in the economy.

The bond market was relatively unconcerned by September's

Consumer Price Index

(

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chart |

source

), which was released before the stock market opened this morning and showed a 0.5% rise in the headline inflation number. It also showed a 0.3% increase in the core inflation rate that excludes food and energy prices.

On an annual basis, CPI is now running at a 3.8% rate for the year through September, well ahead of last year's 2.7% increase. CPI is a key inflation gauge and it looks at the price changes in a representative basket of goods and services.

TheStreet.com

wrote a separate story on

today's report

The 30-year

Treasury bond is also up, gaining 2/32, to 106 27/32, yielding 5.766%.

Tumbling stock prices have been stoking demand for

Treasury securities over the past several weeks. Yesterday, the 10-year note's yield returned to its lowest level of the year, and the five-year note's yield fell to a fresh low for the year. When bond prices rise, their yields drop lower.

Falling stock prices increase demand for Treasuries from the standpoint that bonds hold their value more reliably than stocks. Falling stock prices are seen as an indicator that economic growth will slow, allowing interest rates to fall and bond prices to rise.