30-year Treasury slumps to historic low as recession fears spike

Darnell Taylor
August 20, 2019

Most concerning for US investors was that the yield on the benchmark 10-year Treasury note fell below that for 2-year Treasurys, meaning investors are piling into longer-term investments as a haven against short-term risk.

Investors dumped stocks, more than erasing gains from a rally the day before. "However, the signs flashing from the markets are not great". -Chinese trade tensions and economic growth concerns. Investors do not believe in long-term growth in the USA, and a weaker economy would not allow the Fed to raise its rates.

MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.9% in early trade, while Japan's Nikkei average.N225 tumbled 1.4% and Australian stocks sank 2.1%.

The S&P 500 fell 85.72 points, or 2.9 percent, to 2,840.60. Shares were also in the red in Taiwan, New Zealand and Australia.

South Korean markets were closed for a holiday.

In its latest projection, the USA investment bank lowered its fourth-quarter growth forecast by 0.2 percentage points to 1.8 percent.

The Dow Jones Industrial Average .DJI rose 99.97 points, or 0.39%, to 25,579.39. The Nasdaq lost 242 points, or 3%, 7,773. Weak economic data from Germany and China added to recent signals of a global slowdown. In China, the world's second-largest economy, growth in factory output, retail spending and investment weakened in July. The retailer also cut back its profit outlook for the full year by 20 cents.

He also said the US Federal Reserve would have little choice but to "ease rates, thus keeping US Government bonds from rising materially".

Air strikes hit near Turkish convoy in Idlib - Syrian Observatory
The region is home to some 3 million people, many of them displaced in other battles around the war-torn country. Syrian government troops reached the western outskirts of Khan Sheikhoun earlier in the day.


The dollar recovered from early weakness against the safe-haven yen on the better-than-expected USA retail sales.

The losses come a day after stocks rallied when the Trump administration delayed tariffs on about $160 billion in Chinese goods that were set to take effect on September 1.

All of the 11 major sectors in the S&P 500 closed in negative territory, with energy, financials, materials, consumer discretionary and communications services all falling 3 percent or more.

Traders tend to shift money to the safety of US government bonds when they're fearful of an economic slowdown. But the short-term bond yields themselves wouldn't fall until changes to interest rates are truly imminent or have already happened. Plunging stock prices and inverted Treasury bond yields-which occur before a recession but do not necessarily indicate one is coming-have stoked predictions of a looming economic downturn. It suggests bond investors expect growth to slow so much that the Federal Reserve feels compelled to cut short-term interest rates to support the economy.

On Thursday, the USA 30-year Treasury yield fell to a new record low, according to Refinitiv.

Global stocks crumbled and oil prices extended a punishing sell-off on Thursday as an inverted USA bond yield curve intensified fears about a world recession.

This historic drop in the long term United States bond yield comes shortly after the interest rates on 10-year and 2-year Treasuries inverted. Unemployment held steady at 5.2%.

ENERGY: Benchmark U.S. crude fell another $1.03 to $54.20 per barrel in electronic trading on the New York Mercantile Exchange while Brent crude, used to price worldwide oils, declined $1.49 to $57.99 per barrel in London. Brent crude, the global standard, dropped $1.82 to close at $59.48. Crude oil also declined under $59 but continues to show a series of higher intraday lows. GBPUSD is standing at around 1.2050 for the fifth consecutive trading session. The dollar index .DOXY rose 0.15%, with the euro EURO= down 0.26% to $1.1109.

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