By Daniel Kruger 

U.S. government bond prices edged higher, as a steep fall in U.S. stocks encouraged investors to seek safer assets.

The yield on the benchmark 10-year Treasury note fell for a seventh consecutive trading session, closing at 3.050% from 3.059% Monday. That is the longest streak of consecutive declines since September 2016.

Yields, which fall as bond prices rise, have slid to near the bottom of their recent trading range, as investors have sought safety in U.S. government debt amid mounting concerns that the pace of the economic expansion may be slowing.

While employers continue to add workers, other signs increasingly point to softness in the global economy that some investors fear may contribute to a slowdown in the U.S. Inflation expectations in the bond market have fallen below an average rate of 2% during the next 10 years. The recent declines in stock prices, combined with higher interest rates and a climb in the value of the U.S. dollar have contributed to tighter financial conditions.

"Once those impacts flow through to the real economy, you see a decrease in growth expectations," said Gene Tannuzzo, deputy global head of fixed income at Columbia Threadneedle Investments. "What we're having is a resetting to lower growth expectations for 2019."

The drop in yields has remained contained as officials from the Federal Reserve continue to endorse their plans to gradually raise interest rates. At the same time, investors are also pulling back on their expectations for how many rate increases officials will be able to implement.

Fed funds futures, which investors use to bet on the path of central-bank policy, show that the probability of three or more increases next year has fallen to 10% Tuesday, down from 28% a month ago. The Fed penciled in three increases in 2019 at its September meeting.

Some Fed officials have begun to express concerns about whether the central bank should continue at its present pace of tightening. Federal Reserve Bank of Atlanta President Raphael Bostic said last week that policy makers should take "a tentative approach" to raising rates, given their proximity to the so-called neutral level, where monetary policy neither spurs nor hinders growth.

With the rise in volatility as the Fed raises rates and continues to shrink the size of its balance sheet, policy makers should take a pause after raising rates in December, said Andrew Brenner, head of global fixed income at NatAlliance Securities.

"I don't see a recession, but if the Fed keeps doing what its doing, things could get a lot uglier," he said.

Write to Daniel Kruger at Daniel.Kruger@wsj.com

(END) Dow Jones Newswires

November 20, 2018 16:48 ET (21:48 GMT)

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