US Treasury Department Presents A New Low 30-Year Yield of 3.5%

US Treasury Department Presents A New Low 30-Year Yield of 3.5 by wsjdigitalsubscription

Worries that tightening by the Federal Reserve would cause an economic contraction kept stocks under pressure.

The fear of a recession in the bond market was evident; the 30-year yields fell below 3.5%, the lowest for two months. Demand for longer-dated notes drove an inversion of the curve to a four-decade extreme this week, sending 10-year rates below two-year notes since the early 1980s.

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The bond market seems to show that the Fed is making a “big mistake” with its monetary policy. Deflation is a much bigger risk than inflation; these were the words of Cathie Wood of Ark Investment Management, posted on Twitter

“Investors worry that the economy is too strong and too weak at the same time,” said the president of Yardeni Research. “A recession is imminent or because inflation is likely to continue to fall, perhaps without a recession.” The yield curve spread between the 10-year and 2-year Treasuries suggests the tightening cycle of the Fed is almost over.

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The narrative that inflation has peaked benefits Treasuries over the last month. US mortgage rates fell for the fourth week in a row, the longest falling streak since May 2019, as the Fed has signaled it will slow the pace of tightening soon.

Key events this week:

US PPI, wholesale inventories, University of Michigan consumer sentiment, Friday

Some of the main moves in markets:

Stocks

  • Dow Jones Average fell 0.2%
  • S&P 500 fell 0.3% as of 9:53 a.m. EST
  • MSCI World index fell 0.5%
  • Nasdaq 100 fell 0.8%
  • Stoxx Europe 600 fell 0.5%

Currencies

  • Japanese yen rose 0.2% to 136.67 per dollar
  • Euro rose 0.5% to $1.0520
  • Bloomberg Dollar Spot Index fell 0.3%
  • British pound rose 0.6% to $1.2203

Cryptocurrencies

  • Ether fell 1.9% to $1,232.37
  • Bitcoin fell 1% to $16,827.98

Bonds

  • The yield on 10-year Treasuries declined six basis points to 3.47%
  • Britain’s 10-year yield was little changed at 3.08%
  • Germany’s 10-year yield declined one basis point to 1.79%

Commodities

  • Gold futures rose 0.8% to $1,796.50 an ounce
  • West Texas Intermediate crude rose 0.1% to $74.33 a barrel
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