10-year Treasury note yield plunges below 3% on economy fears
The rush of money into U.S. Treasury bonds this spring is turning into a deluge as nervous investors seek relative safety.
Lousy economic reports Wednesday fueled another buying wave in the Treasury market, driving the benchmark 10-year T-note yield to 2.94%, down from 3.07% on Tuesday and the lowest since early December. As a bond’s yield falls, its price rises.
The Treasury market has been rallying since early April as some investors have been fleeing stocks. That was the case Wednesday as well: The Dow Jones industrial average tumbled 279 points, or 2.2%.
The latest reports on U.S. manufacturing activity, auto sales and job growth all point to a further slowing of the economy — just one month away from the day when the Federal Reserve is supposed to complete its $600-billion Treasury-bond-buying program launched in November. The program has been aimed at keeping the recovery on track by pumping more money into the financial system.
If economic data continue to weaken, the focus may quickly turn to whether the Fed might launch yet another stimulus program — though some analysts believe that any such move by the central bank could spook the markets rather than soothe them.
The latest dive in Treasury yields should help pull mortgage rates lower. But with home prices continuing to drop, it isn’t clear whether lower loan rates would be much of a lure for skittish potential buyers.
Meanwhile, Pimco bond guru Bill Gross continued Wednesday to warn investors away from Treasuries. The fund manager has taken some heat for missing the spring plunge in yields, but he clearly isn’t interested in changing his strategy now.
In his monthly commentary posted on Pimco’s website, Gross argued that yields at these levels “fail to adequately compensate investors for the risk of holding them.”
