Bonds

10-year Treasury yield falls to new all-time low under 0.7% as flight to bonds continues

Key Points
  • The global flight to the safety of government debt continued on Friday as investors piled into U.S. Treasurys and sent the yield on the 10-year note to record lows.
  • The yield on the benchmark 10-year Treasury sank to a record low of 0.676% at 9:46 a.m. ET, extending its break below 0.7%.
  • The plunge in yields came amid an exodus from stocks as disruptions to businesses on the back of the coronavirus outbreak heighten fears of a global slowdown.

The global flight to the safety of government debt continued on Friday as investors piled into U.S. Treasurys and sent the yield on the 10-year note to record lows.

The yield on the benchmark 10-year Treasury sank to an all-time low of 0.676% at 9:46 a.m. ET, extending its break below 0.7% for the first time ever, per Tradeweb data. The rate was last seen slightly higher at 0.791%.

At lows, the yield on the 30-year Treasury bond hit a fresh record low of 1.259%; the 5-year yield fell to 0.532%; and the 2-year yield dropped to 0.439%. Bond yield fall as their prices rise.

The plunge in yields came amid an exodus from stocks as disruptions to businesses around the world on the back of the coronavirus outbreak heighten fears of a global slowdown. The latest coronavirus figures from the World Health Organization (WHO) indicate at least 95,270 cases of the virus worldwide and at least 3,280 deaths.

The angst came despite the U.S. Federal Reserve's first emergency, 50-basis-point cut since the financial crisis earlier this week and the fact that U.S. lawmakers approved roughly $8 billion in emergency spending to combat the disease.

"It's a brave new world of 0-handles and we've now taken to referencing 10-year yields in basis point terms. 1.0%, thanks for the memories," wrote Ian Lyngen, head of rates strategy at BMO Capital Markets. 

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"The 'great repricing' continues, encouraged by falling equity prices and reports that coronavirus infections are approaching 100,000 worldwide," he added. "The economic implications are still unknowable at present, even if the logic that 'the longer the global shutdown continues the deeper the impact' resonates among market participants."

The Dow Jones Industrial Average fell more than 250 points, about 1%, on Friday in yet another big sell-off on Wall Street. The Dow, S&P 500 and Nasdaq Composite on Thursday all sank more than 3% and remain firmly in corrections, each down more than 10% from all-time highs.

Equities and yield moved off their lowest levels Friday morning after the Labor Department reported on Friday that American employers added 273,000 jobs in February and that the unemployment rate held steady at 3.5% as companies in the U.S. continued to hire despite early qualms about the virus. 

Economists surveyed by Dow Jones had been looking for payroll growth of 175,000 and a 3.5% jobless level.

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DoubleLine CEO Jeffrey Gundlach told CNBC on Thursday that he expects the 10-year yield is near the bottom of its fall but that short-term rates will go to zero as growth concerns over the coronavirus persist.

"If we look at history, once the Fed does a panic, inter-meeting rate cut, particularly when it's 50 basis points ... they typically cut pretty quickly again," Gundlach said. "I'm in the camp that the Fed is going to cut rates again, perhaps even in two weeks" during its regularly scheduled meeting.

"We will see short rates headed toward zero," he added.

Treasurys