- REUTERS/Brendan McDermid
- On Thursday, the 10-year US Treasury yield fell to 1.29% for the first time ever.
- Yields, which are inverse to price, have been falling on long-term bonds all week as investors flee to safe-haven assets amid coronavirus fears.
- “If you’re looking for something to worry about, take your eyes off the stock ticker tape and look instead at the bond and oil markets,” economist Ed Yardeni said in a Thursday note. “They continue to flash warning signals about the economy’s strength.”
- Read more on Business Insider.
The yield on the safe haven 10-year US Treasury note has slipped to a new record low as concerns that the coronavirus outbreak will weigh on global growth intensify.
The 10-year Treasury yield fell to 1.29% for the first time ever on Thursday, continuing its slide from earlier in the week as investors pile into benchmark assets. At the same time, the yield on the 30-year US Treasury, which was already at a record low this week, fell further to 1.78%. As bond prices rise, yields fall.
It could be a foreboding sign that the latest coronavirus-induced market rout is far from over, economist Ed Yardeni of Yardeni research wrote in a note Thursday.
“If you’re looking for something to worry about, take your eyes off the stock ticker tape and look instead at the bond and oil markets,” said Yardeni. “They continue to flash warning signals about the economy’s strength.”
Falling bond yields also indicate that traders expect the Federal Reserve to slash interest rates – as the coronavirus rages on, Wall Street has increasingly priced in further rate cuts and now anticipates three this year.
So far, the flu-like virus that originated in Wuhan, China, has killed more than 2,800 and infected more than 82,000, mostly in China. Still, the spread of the virus to other countries including South Korea, Italy, and Iran has sparked further fear that the outbreak could become a pandemic and hammer global growth.
Stocks and oil prices have fallen since Monday as panic grows. On Thursday, former Federal Reserve Chair Janet Yellen warned that the epidemic could throw the US into a recession. While falling yields are cause for concern, they’ve also given the US housing market newfound strength by pushing 30-year fixed mortgage rates to new lows this week.