U.S. Treasury Yields Test Recent Lows -- Update
January 21 2020 - 5:24PM
Dow Jones News
By Sam Goldfarb
U.S. government bond yields fell toward the bottom of their
recent range Tuesday, highlighting a search for safer assets amid
worries about a deadly virus outbreak in China.
The yield on the benchmark 10-year U.S. Treasury note settled at
1.768%, its lowest close since Dec. 3, compared with 1.834% on
Friday. U.S. markets were closed Monday for Martin Luther King Jr.
Day.
Yields, which fall when bond prices rise, slid overnight along
with global stocks after a leading Chinese health official said a
newly identified virus that originated in central China had spread
between humans. That sparked memories among investors of the 2002
outbreak of SARS, a similar coronavirus that killed 774 people and
slowed the Chinese economy.
Investors view Treasurys as one of the safest assets in the
world because they offer a steady stream of income with essentially
no risk of default.
Some analysts said Treasurys had been primed to rally because
they hadn't sold off in recent weeks, even as investors piled into
riskier assets, sending stocks to new records.
"You're definitely getting the bid here in rates," said Justin
Lederer, senior trader of interest rates at Cantor Fitzgerald LP.
"It's been impressive that even with the more risk-on events...you
really haven't been able to push rates significantly higher."
Despite progress in U.S.-China trade relations and easing
recession fears, analysts say demand for Treasurys has been
supported by soft inflation and signals that Federal Reserve
officials are in no rush to change short-term interest rates.
Inflation is a main threat to longer-term bonds because it
erodes the purchasing power of their fixed payments. Any sign that
the Fed is poised to cut interest rates again would likely drag
down Treasury yields in the near-term, especially on those with
shorter maturities. But it could eventually lead to higher
longer-term yields if it helped spur inflation, some analysts
say.
Write to Sam Goldfarb at sam.goldfarb@wsj.com
(END) Dow Jones Newswires
January 21, 2020 17:09 ET (22:09 GMT)
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