NEW YORK (Reuters) – U.S. Treasury yields bounced off record lows but held lower on the day on Monday as worries over the spreading coronavirus and oil price declines sparked a massive selloff in equities.
After falling as low as 0.318% in early trading, the 10-year Treasury yield
“It does look like risk markets are recovering a little bit, so maybe it’s some investors buying the dip in equities,” said Gennadiy Goldberg, senior U.S. rates strategist at TD Securities in New York.
He cautioned that while he has not seen any particular positive news, “liquidity is still very thin, so I wouldn’t read into market moves here just because there is not a lot of volume behind some of these moves.”
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.
Trading in U.S. equities was temporarily halted after the benchmark S&P 500 <.spx> fell 7%, triggering an automatic 15-minute stoppage.
“There’s an obvious panic-buying spree in place (for Treasuries) and, as with every panic buying spree, there is no way to guess where it stops,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia.
Thirty-year Treasury yields were also off their record low of 0.70%
Two-year note yields, which had tumbled to 0.251%
Interest rate futures traders are now fully pricing in an additional 75 basis point rate cut at this month’s Federal Reserve meeting and a 55% probability that the Fed will cut rates back to the 0% to 0.25% band, according to the CME Group’s FedWatch Tool.
(Reporting by Karen Brettell in New York, Karen Pierog in Chicago and Dhara Ranasinghe in London; Editing by Jonathan Oatis and Nick Zieminski)
