Sign in Subscribe
European Union

Treasury Yields Plummet Amid Global Economic Growth Concerns

Strategic Insights

— 2 min read

Global economic growth concerns led to the largest one-day price gain in almost seven months for 10-year Treasury notes yesterday. The yield on the benchmark 10-year note fell 0.10 percentage point, to 3.94 percent, the lowest since June 8. This decline was influenced by the possibility of rate cuts in Europe, particularly after Sweden's central bank reduced interest rates by more than expected. Treasuries followed a rally in European bonds, with investors increasing bets that the European Central Bank would cut its interest rate target.

Key Takeaways:

  • The 10-year Treasury note experienced its biggest price gain in almost seven months, driven by concerns over global economic growth.
  • The yield on the benchmark 10-year note fell 0.10 percentage point, to 3.94 percent, the lowest since June 8.
  • The price of the 41/8 percent note due in May 2015 rose more than 7/8, or $8.75 per $1,000 face amount, to 10117/32.
  • Traders in the United States pared bets on how much the Federal Reserve would increase its target rate over the next few months.
  • The yield on the December eurodollar futures contract fell 7.5 basis points, to 3.885 percent, the lowest in two weeks.
  • Two members of the Bank of England's rate-setting committee, including Charlie Bean, the chief economist, called for a rate cut at its last meeting.
  • Sweden's central bank reduced interest rates by more than economists expected, contributing to the credibility of a global growth slowdown.
  • Higher energy costs may curb consumer spending and erode corporate profits, according to Satoshi Asai, who helps oversee $1 billion of bonds at Sompo Japan Asset Management.

Statistics:

  • Yield on 10-year Treasury note: decreased by 0.10 percentage point to 3.94 percent on June 8.
  • Biggest one-day drop in yield since December.
  • Price of 41/8 percent note due in May 2015: rose more than 7/8, or $8.75 per $1,000 face amount, to 10117/32.
  • Yield on December eurodollar futures contract: fell 7.5 basis points to 3.885 percent, lowest in two weeks.

Sources:

  • "Treasury Yields Fall as Global Growth Concerns Rise," published on Bloomberg.
  • "Sweden Reduces Interest Rate by More Than Expected," published on Bloomberg.
  • "Minutes of the Bank of England's June 8 and 9 Meeting," published by the Bank of England.
  • "European Central Bank's June 8 and 9 Meeting Minutes," published by the European Central Bank.

Read more