The global flight to the safety government debt continued on Friday as investors piled into U.S. Treasuries and sent the yield on the 10-year note to record lows.
The yield on the benchmark 10-year Treasury note sank to 0.695% around 4:45 a.m. ET, breaking below 0.7% for the first time ever, according to Tradeweb data. As of the latest reading, however, the 10-year yield had moved off those lows to 0.72%.
The yield on the 30-year Treasury bond hit a fresh record low of 1.279%; the 5-year yield fell to 0.537%, its lowest level since July 2012; and the 2-year yield dropped to 0.451%, its lowest since January 2016. 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.
“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.
“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 U.S. Federal Reserve has already implemented an emergency 50-basis-point cut to interest rates in a bid to contain the expected economic fallout from the outbreak, the first such reduction since the financial crisis.
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.
The U.S. government announced an $8 billion spending package on Wednesday to help combat the spread of the coronavirus, while the IMF also unveiled a $50 billion aid program.