Falling Treasury yields are a litmus test for pessimism, and there's plenty of that around.
Yields move counter to prices, and buying in the bond market has driven interest rates to a level not expected by many bond pros just several months ago. But the potential for bad news keeps piling up, and there are now expectations that the 10-year Treasury yield could touch 2 percent, or even the 1.87 percent it was at just before the election with another unexpected development.
"You've got North Korea. You've got data weakness. You've got a hawkish Fed. You pick your poison. There's so many things that could be hitting rates here at any minute," said Aaron Kohli, senior rate strategist at BMO Capital Markets.
After a rally Monday, stock prices sagged Tuesday in a global sell-off that included worries about Sunday's upcoming French election, and heightened tensions between the U.S. and North Korea. The mood was made even worse by a rare Goldman Sachs earnings miss. Add to that, a weak inflation report last Friday, which signaled to some the Fed may be moving on rate hikes too quickly, plus a looming debate in Congress about funding the government by April 28.
The 10-year yield fell to a low of 2.165 percent Tuesday, the lowest since Nov. 10. The yield was at 2.171 percent in late trading. The yield was at 2.40 percent on March 24, the day the White House and Congress failed to hold a vote on a health care bill to replace Obamacare.
There is also lingering disappointment with Congress and the Trump administration over what looks like a longer time line to tax reform and stimulus. That was confirmed Monday when Treasury Secretary Steve Mnuchin said an August deadline for tax reform that he previously suggested would be too aggressive.
"On top of all that you have a logjam in Congress that's not getting anything through," Kohli said. He said on the chart of the 10-year Treasury yield, there is a gap at about 2.13/2.15 percent. "It probably needs some new bit of negative information to get through that opening gap," said Kohli, adding the next level below that would be 1.87 percent.