30-year Treasury bond yield hits record low as recession fears grow

Andrew Cummings
August 29, 2019

Stock markets in Asia and Europe had advanced following US President Donald Trump's comment on Monday that Chinese officials had contacted their US trade counterparts and offered to resume negotiations, an assertion China did not confirm. This was its most inverted level since May 2007 and is the offshoot of investors fleeing to safe-haven assets like US government bonds as Trump's trade war against China continues.

The selling, which erased some of the market's gains from Monday's strong rally, came as long-term bond yields once again fell below short-term ones, a rare phenomenon that has heralded previous recessions.

The Australian government bonds jumped during Asian session Wednesday amid turmoil of ongoing risks of trade war while the U.S. Treasury yield curve continued inversion, indicating red signals of plausible recession. As noted by The Atlantic, people between the ages of 22 and 38 graduated into a historically bad job market and were never able to build up sufficient savings. The 30-year Treasury yield also fell to a record low of 1.906%. It's been tough enough for them to make up lost ground as it is, and another recession, some fear, could make it impossible.

The yield on the 10-year Treasury note tumbled to 1.48% from 1.54%.

"The price action reflects a variety of market participants' fears that their business model will be highly strained if rates fall to very low levels for an extended period", Michael Cloherty, head of US interest rate strategy at RBC Capital Markets, said of Wednesday's trading.

The spread between the 2-year note and the 10-year note stood at negative 4 basis points, Tradeweb data show.

The dollar index fell 0.05 per cent, with the euro down 0.1 per cent to US$1.1089 (RM4.66).

On the stock market, the Dow Jones Industrial Average closed down almost 0.5 percent, while the S&P 500 index and the Nasdaq Composite shed more than 0.3 percent each. Stocks are now earning more for investors than key long-term Treasury bond for the first time since the Great Recession that began in 2008.

When the yield curve inverted earlier this month for the first time since 2007, it led to a broad market sell-off. Investors are trying to gauge whether trade conflicts and slowing economies around the world will drag the USA into a recession.

"What's still rattling investors is the reality that the trade war is dragging on and, despite discussions about an upcoming meeting, the market is losing confidence that perhaps that might take place", Heckman said. Autodesk rose 1.8% and Regeneron Pharmaceuticals added 2.1%.

Stock dividends are also exhibiting clear warning signs of an impending recession.

NOT SO SNACKWORTHY: J.M. Smucker sank 9.3% after turning in weak results.

Troubled pizza company Papa John climbed 9.5% after naming a new CEO.

Other reports by iNewsToday