U.S. 30-year yields are closing in on their lowest level ever as concern grows about the impact of the escalating trade war on global economic growth and as policymakers around the world step in to provide support.
Dovish actions by central banks from New Zealand to India on Wednesday added fuel to the rally in bonds, dragging the yield on 30-year U.S. debt down by as much as 11 basis points to 2.12%. That's close to the all-time low of 2.0882% reached in July 2016.
The Treasury curve flattened, signaling increased alarm among investors about the prospects for the economy, while U.S. stocks dropped. In Germany, the gap between 2-year and 30-year bond yields was compressed to levels unseen since the financial crisis more than a decade ago.
"This is all about the race to the bottom by central banks," said London-based Peter McCallum, a fixed-income strategist at Mizuho International. The Federal Reserve "is going to become more dovish, and that's why long-end Treasuries is being supported."
The moves come ahead of a U.S. auction of 10-year debt Wednesday that will test investors' appetite for yields at these lower levels, while the Treasury Department is slated to sell 30-year securities on Thursday.
The benchmark U.S. 10-year yield slipped as much as 11 basis points to 1.59%, the least since 2016, while fed funds futures showed traders adding to bets on U.S. central bank easing. The market is pricing around a percentage point of Federal Reserve interest-rate cuts over the next year, with the November contract pricing in around half a point of easing from current levels.
