Jamie Spencer
Investors poured into U.S. government bonds on Thursday as concerns over slowing economic growth weighed on stocks. The shift came as 10- and 30-year Treasury yields hit their highest levels this month before retreating.
Flight to Safety
Bonds helped buffer losses in equities, with U.S. benchmarks sinking to six-month lows amid escalating trade war fears. “Diversifying out of stocks to Treasuries is still working,” said Ed Al-Hussainy, global rates strategist at Columbia Threadneedle Investments.
Tariffs Stoke Inflation Worries
Barclays economists lowered their U.S. GDP forecast and now predict two Federal Reserve rate cuts this year, up from one. However, tariffs may push inflation higher, complicating the Fed’s decision-making.
Bond Market Reaction
The 10-year Treasury yield fell to 4.27% after touching 4.35%. Earlier, bonds had little reaction to data showing U.S. wholesale inflation stagnated in February, with the producer price index remaining flat from January.
Fed Rate Cut Expectations
Swaps traders now anticipate at least two Fed rate cuts this year, with the first fully priced in by July. Markets are watching whether the 10-year yield will break below 4.25% or remain in a 4.25%-4.75% range.
30-Year Treasury Auction
A 30-year Treasury auction in the afternoon saw weaker-than-expected demand, though yields fell further after the sale, tracking equity losses.
