By Daniel Kruger 

Government-bond yields around the world fell to fresh lows for the year Tuesday after European Central Bank President Mario Draghi said the bank could soon add stimulus to support the region's economy.

The yield on the U.S. government's 10-year Treasury note, which falls as bond prices rise, dropped to as low as 2.017%, according to Tradeweb, after fresh economic data offered signs that growth was further decelerating in Europe, adding to concerns that it could spill over to the U.S.

Investors watch the 10-year Treasury yield as a barometer for the health of the U.S. economy because it helps set borrowing costs for everything from mortgages to corporate loans.

The decline is happening at the same time the Federal Reserve is starting a two-day meeting in Washington. Investors have increased bets in the past month that policy makers will cut interest rates this year, perhaps more than once, on signs of persistent low inflation and slowing global growth.

The shift in ECB policy sent an important signal about the level of concern among officials about sluggish growth prospects in Europe, where export-driven economies have been hampered by global trade tensions. An ECB decision to add stimulus could give Fed officials added impetus to cut interest rates in the near future, some investors and analysts said.

"A coordinated response by central banks can be very effective," said Edward Al-Hussainy, a government bond and currency strategist at Columbia Threadneedle Investments. "To the extent the Fed is considering easing policy, doing it in conjunction with the ECB will increase its effectiveness."

Investor sentiment has shifted rapidly in favor of Fed rate cuts in recent weeks as signs that trade tensions with China may take longer to resolve have dented expectations that officials on both sides were nearing an agreement on a deal that could improve the outlook for global trade and growth.

Fed-funds futures, which investors use to bet on the path of central-bank policy, show an about 90% probability that officials will cut rates at their meeting next month, according to CME Group data. A month ago the odds were roughly one in four.

Longer-term government bond yields tend to fall when investors are worried about the economy. The retreat of 10-year Treasury yields from multiyear highs hit last year have rattled financial markets and sparked fears of a coming recession.

Yields on Treasurys rose off their lows after President Donald Trump said on Twitter that he plans to have "an extended meeting next week" with Chinese President Xi Jinping at the G-20 summit in Japan, spurring hopes that there could be progress on persistent trade tensions between the world's two largest economies.

The benchmark 10-year Treasury note yield was recently 2.068%, down from 2.086% Monday. Its lowest close this year was 2.085% earlier this month.

Yields on government debt across Europe were on track to fall to record lows, as investors bet that the ECB could lower interest rates further below zero or resume asset purchases that policy makers had brought to an end at the start of the year.

The dollar rose against the euro, though both were broadly weaker as yield-hungry investors flocked to emerging-market currencies whose central banks have set interest rates at higher levels, offering greater returns.

The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, declined by less than 0.1% to a recent 90.78. The dollar rose 0.3% against the euro. It was weaker against higher-yielding currencies, falling 0.5% against the Mexican peso and 0.7% versus the Brazilian real.

Gains in safe government securities extended earlier after the European Union said exports from the eurozone to the rest of the world fell 2.5% in April from the month before and the German ZEW Index, a gauge of financial market confidence, retreated in June.

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

(END) Dow Jones Newswires

June 18, 2019 11:35 ET (15:35 GMT)

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