10-year Treasury yield drops to another record low of 1.03% as historic fall in US rates continues

The 10-year Treasury yield dropped to another record low on Monday as the historic decline in U.S. rates continued amid the coronavirus outbreak and Wall Street calls for Federal Reserve stimulus.

The 10-year yield hit a record low of 1.030% at one point overnight before bouncing and was last at 1.06%.  The 2-year Treasury yield fell to 0.71%, threatening to break its low in November 2016. The 30-year yield was at 1.623%, a record low.

Investors are betting the Federal Reserve will now act aggressively in response to a coming economic slowdown due to the coronavirus outbreak. The fed funds futures market has already priced in a 50 basis point cut at the Fed's meeting this month, according to CME Fed Watch tool.

President Donald Trump increased pressure on the Fed to cut interest rates, tweeting Monday that the U.S. central bank is "slow to act" and falling behind its global peers.

Goldman Sachs sees the Fed cutting its benchmark rate 100 basis points in total this year. Fed Chairman Jerome Powell released a statement on Friday afternoon that said the coronavirus "poses evolving risks" and that officials will "will use our tools and act as appropriate to support the economy."

Investors have fled stocks and rushed into bonds, pushing yields to historic lows, as fears of a coronavirus outbreak gripped the globe. The benchmark 10-year rate, which moves inversely with prices, tumbled about 37 basis points in February alone. Stocks had their worst week since the financial crisis last week and were slated to open lower again on Monday. 

Recession fears

Senior White House officials have attempted to calm market panic over the potential of the virus to trigger a global recession, as the U.S. reported its second death in Washington state and a first case in New York City was confirmed.

Still, some on Wall Street are warning about an economic downturn. Ed Hyman, a widely followed economist on Wall Street, said the outbreak could end up causing a recession in the U.S. and slashed his U.S. GDP forecast to zero growth in the second and third quarters of this year.

Yields remains near record low levels after  showed a slowdown last month. The ISM manufacturing index fell to 50.1 in February, the lowest level since the end of 2019. It also came below an estimate of 50.8.

Adding to the slew of bad news is China's official Purchasing Managers' Index (PMI), a gauge for its manufacturing sector, which plunged to a record low of just 35.7 in February. Any reading below 50 signals a contraction. The somber reading provides the first official snapshot of the state of the Chinese economy since the outbreak of the coronavirus that has killed almost 3,000 people in mainland China and infected about 80,000.

— CNBC's Elliot Smith and John Melloy contributing reporting