Bond Yields Continue To Fall As Investors Flee Stocks

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%.

Related Links:

Jim Cramer's Early Morning Commentary: Markets In 'Uncharted Waters'

Experts: Keep The Yield Curve Inversion In Perspective

Photo by Sealy j via Wikimedia.