U.S. Treasury yields hit new lows, set for biggest falls in years

[March 09, 2020]  By Dhara Ranasinghe

LONDON (Reuters) - U.S. 10-year Treasury yields slid to new record lows on Monday and were set for their biggest one-day fall in almost a decade, as coronavirus panic gripped world markets and stoked fears that the world economy is headed for a recession.

United States one dollar bills are curled and inspected during production at the Bureau of Engraving and Printing in Washington November 14, 2014. REUTERS/Gary Cameron

As global share markets tumbled, investors fled headlong to bonds to hedge the economic trauma of the coronavirus, and oil plunged more than 30% after Saudi Arabia opened the taps in a price war with Russia.

The U.S. 10-year Treasury yield fell to as low as 0.318% <US10YT=RR>. It was last down 22 basis points on the day and set for its biggest daily fall since 2011 - when a sovereign debt crisis ragged across the euro zone.

(Graphic: U.S. 10-year bond yield - https://fingfx.thomsonreuters.com/
gfx/mkt/13/3037/3002/US0903.png)

Thirty-year Treasury yields were last down 30 bps on the day, having hit a new record low at 0.70% <US30YT=RR> as investors bet the Federal Reserve would be forced to cut interest rates by at least 75 basis points at its March 18 meeting, despite having only just delivered an emergency easing.

"The levels we're seeing in U.S. Treasury yields are not disconnected from the reality," said Peter Chatwell, head of rates strategy at Mizuho in London.

"There is a virus spreading across the globe and the action taken to control that spread will materially reduce economic activity and we already had a soft global economy."

Two-year bond yields tumbled to 0.285% <US2YT=RR>, their lowest since 2014. They have fallen for 13 straight sessions.

As two-year U.S. bond yields neared 0%, shorter-dated yields on British gilts turned negative for the first time.

Five-year Treasury yields briefly touched a record low during Asian trade at 0.325% <US5YT=RR> and were last down 12 bps on the day at 0.43%

As world stock markets and oil prices tanked, U.S. stock market futures <ESc1> <1YMc1> suggested Wall Street was set for a drubbing when they open later on Monday.

"The Treasury moves are quite striking; the market is struggling to find an equilibrium for Treasuries, the most liquid asset around," Commerzbank rates strategist Rainer Guntermann said.

(Reporting by Dhara Ranasinghe; Editing by Alex Richardson and Ed Osmond)

[© 2020 Thomson Reuters. All rights reserved.]

Copyright 2020 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.  Thompson Reuters is solely responsible for this content.