Bonds

10-year Treasury yield falls below 1.2%, hitting a new five-month low

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U.S. Treasury yields continued to slide on Monday, with the 10-year benchmark rate falling to its lowest level in five months.

The yield on the benchmark 10-year Treasury note fell 11 basis points to 1.189% at around 4:00 p.m. ET. The yield on the 30-year Treasury bond slid 11 basis points to 1.82%. Yields move inversely to prices.

Treasurys

The fall in yields came as stocks tumbled. The Dow Jones Industrial Average shed more than 850 points. The S&P 500 and Nasdaq Composite lost 2% and 1.5%, respectively.

Stocks tied to the reopening were weaker as investors grow concerned about the shape of the economic recovery amid hot inflation readings and the spread of Covid variants.

"The entire financial market is acting as though a significant economic slowdown is nearing," said Jim Paulsen, chief investment strategist at the Leuthold Group. 

The "Covid redux is adding to fears as renewed mask mandates are scaring many that economic closures may also start to happen again. This fear is causing some to lower real GDP estimates again which is driving bond yields lower and hitting economically sensitive stocks like cyclical sectors and small cap stocks the most," Paulsen added.

The 10-year Treasury yield hovered near 1.3% on Friday, with data showing that retail sales had rebounded 0.6% in June, versus a 0.4% drop expected by economists.

Auctions are due to be held on Monday for $54 billion of 13-week bills and $51 billion of 26-week bills.