Treasury Yields Fall to Lowest Level Since 2017 Amid Worries on Growth, Trade
24 May 2019 - 1:12AM
Dow Jones News
By Daniel Kruger
The yield on the benchmark 10-year Treasury note fell to its
lowest level since 2017, dragged down by growing investor concerns
that trade tensions between the U.S. and China could last longer
and strain growth more than previously thought.
The 10-year yield recently traded at 2.329%, according to
Tradeweb, down from 2.393% Wednesday. That is below its 2019 low
and near the lowest close since late 2017.
Yields, which fall as bond prices rise, slid as global stocks
faltered after surveys of purchasing managers in Europe suggested
weak demand for exports, a sign it could be difficult for the
region to climb out of its rut.
They extended their declines after a pair of reports suggested
the economy could be losing steam. New-home sales declined 6.9% in
April, the biggest decrease since December, the Commerce Department
said Thursday. Economists surveyed by The Wall Street Journal had
expected a 2.7% drop.
A flash reading of the IHS Markit Composite PMI Output Index, a
measure of overall business activity in the manufacturing and
services sectors, fell to 50.9 in May, down from 53 in April. The
lower growth in output from both sectors was due to softer demand
and fewer new orders.
The yield on the 10-year note fell below the yield on the
three-month Treasury bill for the first time since May 15, raising
concerns among some investors about the durability of the economic
expansion.
Investors watch the dispersion between yields on short- and
longer-term Treasurys, called the yield curve, because it is seen
as an important barometer of economic conditions. Shorter-term
yields tend to exceed longer-term ones before recessions, a
phenomenon known as an inverted yield curve.
Bank of America Merrill Lynch Wednesday lowered its year-end
forecasts for sovereign bond yields in countries including the
U.S., Germany and Australia, citing a loss in confidence that the
U.S. and China can resolve their disputes in the near future.
"Everybody is reassessing," said Jim Vogel, head of
interest-rate strategy at FTN Financial. It will take time for
investors to re-evaluate what has changed about their view of the
economy and how that underpins markets, and in the beginning of
that process "you have people reflexively flich and move away from
risk," he said.
Write to Daniel Kruger at Daniel.Kruger@wsj.com
(END) Dow Jones Newswires
May 23, 2019 10:57 ET (14:57 GMT)
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