Investors spooked by the coronavirus outbreak continued to flock to the safe haven of government debt on Friday, driving the yield on the 10-year Treasury note to record lows.
After sinking to an all-time low of 0.6572% early in the day, the yield on 10-year debt bounced back to around 0.74%. The 30-year rate, meanwhile, plunged as much as 34 basis points to 1.2036%.
As CNBC reports, “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.”
Financial markets have continued to reel even though the U.S. Federal Reserve earlier his week cut interest rates by 50 basis points and Congress approved roughly $8 billion in emergency spending to combat the coronavirus.
“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,” Ian Lyngen, head of rates strategy at BMO Capital Markets, wrote in a client note.
“The ‘great repricing’ continues, encouraged by falling equity prices and reports that coronavirus infections are approaching 100,000 worldwide,” he added.
The 10-year Treasury yield ticked upward on Friday after the Labor Department reported that U.S. 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.
“You can’t rule out the 10-year going to 50 basis points. It’s just around the corner now,” Andrew Richman, director of fixed income strategies at SunTrust Advisory Services, told MarketWatch.
DoubleLine CEO Jeffrey Gundlach believes 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,” he told CNBC. “I’m in the camp that the Fed is going to cut rates again, perhaps even in two weeks” during its regularly scheduled meeting.