With the stock market in turmoil Monday, investors fled to government bonds and sent Treasury yields to new lows.
Treasury Bond Prices Rise
The yield on the 10-year Treasury fell briefly to an all-time low, just above 0.3%, in overnight trading. By early afternoon Monday, the benchmark was just above 0.51%, a sharp drop from where it was Friday.
The yield, which drops as bond prices rise, had never been below 1% until last week. The 30-year yield also fell below 1%.
The 10-year yield is a benchmark for mortgage and other loan rates.
Treasury bond prices, already at new highs, rose again Monday as investors sought safety from a turbulent day on the stock market in which the Dow plunged more than 7% and trading had to be halted just after the open.
Coronavirus fears and a new rising oil price war between Russia and Saudi Arabia were generally to blame.
Inverted Yield Curve
Economists have been warning for months that the bond market is showing a key warning sign of impeding recession, the situation known as the "inverted yield curve."
Normally, yields are higher on longer-term 10-year Treasury bonds than on short-term notes, such as those with a three-month or two-year maturity. That is, typically, bond buyers get more yield for a long-term loan to the government in which they won't be paid back for 10 years. Short-term notes have a lower yield.
But lately, the yields have been higher for short-term bonds, and when the yield curve is inverted it often portends a recession within a couple of years.
Short-term yields were also falling on Monday as traders wagered the Federal Reserve will cut rates deeper. The two-year Treasury yield, which often tracks Fed action, fell to 0.33%.
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