U.S. sovereign bond prices surged on Monday, as volatility in stocks persisted and rate rise fears dominated markets.
U.S. stocks opened lower Monday as investors rushed to traditional safe-haven assets such as gold and U.S. Treasurys on global growth and rate hike worries, ahead of Federal Reserve Chair Janet Yellen's testimony this week.
The yield on 10-year Treasury notes, which moves inversely to the bond's price, hit a 1-year low below 1.75 percent and was last trading at 1.743 percent, after closing at 1.848 percent on Friday. This is down from 2.3 percent at the start of the year, as safe-haven buying has continued to weigh on yields.
Meanwhile, the longer-dated 30-year yield was lower at 2.567 percent. Two-year yields also hit their lowest level in over 3 months and last traded at around 0.666 percent.
Treasurys
The three major U.S. stock averages fell more than 2 percent each on Monday before gaining back some ground.
Investors will also be keen to hear what Fed Chair Janet Yellen has to say this week as she delivers two days of testimony on the economy before congressional committees Wednesday and Thursday.
The Fed chair's testimony comes as markets grow anxious about the health of the economy and the Fed's stated intention to continue on a rate hiking path.
"The markets were unsure how to interpret Friday's U.S. Employment Report for January, which revealed slower-than-expected growth in non-farm payrolls, but both a decline in the unemployment rate and faster growth in wages," said chief markets economist at Capital Economics, John Higgins.
Markets have also priced out the possibility of a rate hike for this year over concerns that the weakening economy and faltering financial conditions could give way to a recession. New York Fed President William Dudley this past week highlighted the Fed's concerns about financial conditions.
"We still expect the Fed to act more decisively than investors anticipate, as inflation surprises on the upside. January's Employment Report has reinforced our view about the prospects for wage inflation. And we expect the deflationary pressure from lower commodity prices and the strong dollar to fade later this year," Higgins said.
"Admittedly, our forecasts for U.S. monetary policy are still out on a limb, if not quite as far. But investors have tended to underestimate Fed tightening in the past," he added.
There are several economic reports of importance in the week ahead. The JOLTs report on job openings and turnover Tuesday will be important, after the January employment report showed a big decline in hiring — just 151,000 payrolls — but a surprise pickup in wages and a decline in unemployment to 4.9 percent, due to more workers finding jobs.
U.S. equities closed sharply lower on Friday amid a massive drop in technology stocks and as mixed U.S. employment data raised concerns the Federal Reserve may raise rates this year.
The Nasdaq composite fell 3.25 percent, as Apple and the iShares Nasdaq Biotechnology ETF (IBB) dropped 2.67 percent and 3.19 percent, respectively.