The stunning move in Treasury yields to record lows early Friday morning signals panic and fear, but it's not necessarily coming from the United States.
U.S. bond yields are tethered to global rates, and with about $12 trillion in negative-yielding debt around the world, U.S. Treasurys and corporate debt look very attractive.
As the yields on U.K. gilts sunk to new lows overnight and German bunds dug deeper into negative territory, buying in U.S. Treasurys sent the 30-year bond yield to an all-time low of 2.18 percent early Friday and the 10-year dipped below its closing high of 1.38 percent temporarily.
"This is buying coming from Europe. It started around 2 in the morning," said Andrew Brenner, head of international fixed income at National Alliance. "This is all about flight to quality, flight to quality in duration." The duration of choice for traders has been the longer end — the 10- and 30-year sector of the U.S. bond market.
"It was absolutely panic buying. Panic buying shows up more as a panic when you're at one of the more illiquid days of the year, when you're at a skeleton staff which is what you are today," said Brenner. "I don't use those words lightly. This thing at 2 a.m. shot up right off the bat."
The buying calmed down as the U.S. market opened. The U.S. 30-year was at 2.21 percent Friday. It's previous closing low was 2.223 percent, reached in January 2015. The 10-year yield was at 1.44 percent in morning trading, back above the low it set in July 2012.
"This morning was the lowest yield we've ever seen in the 30-year," said Brenner. Bank of America Merrill Lynch, however, said the yield was the lowest since the 1950s, according to Reuters.
Some of the latest round of buying was triggered by comments from Bank of England Governor Mark Carney on Thursday who said the U.K. central bank is likely to ease again this summer. The U.K. two-year temporarily turned negative, and the 10-year gilt yield briefly touched a low of 0.77 percent, after falling below 1 percent for the first time after the Brexit vote.
European bonds ignored good news for the euro zone economy, which showed improvement in manufacturing activity Friday. Euro zone manufacturing PMI reached a six-month high of 52.8, and British manufacturing PMI, at 52.1, expanded at the best pace in five months.