US 30-year bond yield hits record low as recession fears grow

August 29, 2019 09:28
As yield curve inversion grows, traders have become increasingly worried about what it could portend. Photo: Reuters

US Treasury debt yields fell on Wednesday, with 30-year yields setting all-time lows, as fears about a recession and trade tensions between China and the United States stoked further demand for low-risk government debt, Reuters reports.

In late trading yesterday, the yield on 30-year government bonds was at 1.939 percent, down 2.2 basis points from late Tuesday. The yield hit an all-time low of 1.905 percent earlier in the day.

The 30-year yield is below 3-month T-bill rates, something that has not happened since 2007, the report noted.

As for the rest of the yield curve, the spread on three-month T-bill rates over 10-year yields widened to as much as 55 basis points, a level not seen since March 2007.

Meanwhile, the premium on 2-year yields above 10-year yields increased to as high as 6.5 basis points, the report said, citing Refinitiv and Tradeweb data.

The developments have unsettled investors as yield curve inversion often precedes a recession.

“A deeper inversion is sending a stronger statement that a meaningful slowdown is coming,” Brian Rehling, co-head of global fixed income strategy at Wells Fargo Investment Institute in St. Louis, told Reuters.

“A recession is a possibility in the next 12 to 18 months, but it’s not a done deal.”

Investors added to their safe-haven holdings of Treasuries as UK Prime Minister Boris Johnson sought to limit parliament’s opportunity to derail his Brexit plan by suspending the House of Commons for around a month, starting in mid-September.

While some fund managers view Treasuries as expensive, they are hard pressed to make a case to sell them given the uncertain outcome of the trade developments between Beijing and Washington, the report noted.

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