The Economy

U.S. Treasury Yields Signal Economic Fears

The benchmark 10-year note hits a record low as investors seek a safe haven amid post-Brexit uncertainty over the global economy.
Matthew HellerJuly 7, 2016

The yield on the 10-year U.S. Treasury note hit a record low, reflecting continued fears of global economic instability after the U.K.’s decision to leave the European Union.

Interest paid on the benchmark note reached 1.34% early Wednesday, just below the previous record set in 2012, before climbing up to 1.3868%. Thirty-year bond yields also hit a fresh record low of 2.098% before trading higher at 2.1590%.

As recently as the start of June, the Treasury yield was 1.85% but as The Associated Press reports, the Brexit vote has “magnified concerns about the global economic order.”

“There’s just generally a feeling that [investors] want to be in some kind of safety,” said Tom di Galoma, managing director at Seaport Holdings. “I think we’re going to see lower yields across the globe.”

Benchmark 10-year government debt yields from Germany, the U.K., Switzerland, France, Denmark, and Sweden all fell to fresh historic lows on Tuesday.

“Lower yields in the developed world reflect a lack of confidence over the global economy that has been running at a sluggish pace due to soft global demand for goods, stagnant wages and aging populations,” The Wall Street Journal said.

In July 2012, the 10-year U.S. Treasury note closed at a low of 1.404% as investors rushed into haven debt amid the eurozone’s sovereign debt crisis. “The market’s signal this time seems somewhat hazier than usual, and there’s far from any consensus among economists that a recession is approaching,” the AP said, noting that “the U.S. economy — the world’s largest — still looks relatively sturdy.”

According to traders, the 10-year yield still has room to fall and analysts say it wouldn’t surprise them if the 30-year yield falls below the 2% mark in the weeks ahead.

“The global economy is vulnerable to shocks,’’ Jae Yoon, chief investment officer at New York Life Investment Management, told the WSJ. “There is lot of uncertainty regarding Brexit.”

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