Bruce Lietzke tied his career-low round with a 9-under 62 to take over third place at 10-under 132, but a more remarkable feat was accomplished by a player who finished two shots off the pace at minus 9.
Walter Morgan fired a sizzling round of 11-under 60 to tie the all-time 18-hole scoring record on the Senior Tour.
In addition to matching the record score established by Isao Aoki at the 1997 Emerald Coast Classic, the 61-year-old Morgan became the youngest player to shoot below his age on the elder circuit.
'I was just playing one hole at a time,' said Morgan, who also set new tournament and course records. 'On Tuesday in the practice round, a kid told me I would shoot 61. I wasn't really thinking about shooting a 59. I was just trying to shoot my age.'
Morgan opened with six birdies over his first eight holes and added a stretch of four straight birdies from the 10th to go to 10-under on his round. A bad chip at the 14th resulted in his only dropped shot.
Morgan recovered with a birdie at the 15th, then hit a wedge inside 12 feet for birdie at the very next hole to complete the record-setting round.
Jenkins played a modest round, given the conditions for scoring, to maintain a share of the lead he held alone after the first day. He got off to a solid start with a pitch-in birdie at the first and added another at the second.
'The guys shooting 60 and 62 used up all the birdies ahead of us,' joked Jenkins, who admits to being a bit under the weather this week. 'I still have something left in the tank.'
He ran into trouble with a bogey at fourth but responded with two birdies on the back side to stay atop the leaderboard. At the par-4 18th, Jenkins suffered a three-putt bogey and fell into a share of first with Hatalsky.
Hatalsky used a brilliant back nine to finish at 11-under. The 50-year-old ran home a 25-footer for eagle at the 10th and reached the green in two at the par-5 13th to set up another.
At the par-4 16th, Hatalsky hit his approach inside eight feet of the cup for a birdie and a round of 7-under 64.
'Very solid day,' said Hatalsky. 'Anytime you shoot a low score like that, you're doing something right. The eagles really jump-started me.'
The course played to an scoring average of 69.395, the lowest on the Senior Tour this season.
Bruce Summerhays posted a round of 6-under 65 to finish two shots off the pace alongside Morgan. Butch Sheehan and Canadian Gar Hamilton were one shot further back at 8-under-par 134.
Mike McCullogh, Tom Kite and Allen Doyle were tied for eighth at 7-under-par 135.
Defending champion Walter Hall carded a 2-under 69 to finish six shots back at 5-under-par.
Full-field scores from the AT&T Canada Senior Open