10-year Treasury yield drops to another record below 1.04% as historic fall in yields continues

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The 10-year Treasury yield dropped to another record low on Monday below 1.04% as the historic decline in yields continued amid the coronavirus outbreak and Wall Street calls for Federal Reserve stimulus.

The 10-year yield hit a record low of 1.036% at one point overnight before bouncing and was last at 1.05%.  The 2-year Treasury yield fell to 0.71%, threatening to break its low in November 2016. The 30-year yield was at 1.623%, a record low.

Investors are betting the Federal Reserve will now act aggressively in response to a coming economic slowdown due to the coronavirus outbreak. The fed funds futures market has already priced in a 50 basis point cut at the Fed’s meeting this month, according to CME Fed Watch tool.

Goldman Sachs sees the Fed cutting its benchmark rate 100 basis points this year. Fed Chairman Jerome Powell released a statement on Friday afternoon that said the coronavirus “poses evolving risks” and that officials will “will use our tools and act as appropriate to support the economy.”

Investors have fled stocks and rushed into bonds, pushing yields to historic lows, as fears of a coronavirus outbreak gripped the globe. The benchmark 10-year rate, which moves inversely with prices, tumbled about 37 basis points in February alone. Stocks had their worst week since the financial crisis last week and were slated to open lower again on Monday.

Senior White House officials have attempted to calm market panic over the potential of the virus to trigger a global recession, as the U.S. reported its second death in Washington state and a first case in New York City was confirmed.

Adding to the slew of bad news is China’s official Purchasing Managers’ Index (PMI), a gauge for its manufacturing sector, which plunged to a record low of just 35.7 in February. Any reading below 50 signals a contraction. The somber reading provides the first official snapshot of the state of the Chinese economy since the outbreak of the coronavirus that has killed almost 3,000 people in mainland China and infected about 80,000.

After taking a historic hammering last week, stock markets around the world look to be struggling to rally on Monday, likely driven by hopes of a coordinated global monetary policy response to mitigate against the economic fallout from the outbreak.

The final IHS Markit U.S. manufacturing PMI (Purchasing Managers’ Index) reading for February is due at 9:45 a.m. ET, before a host of ISM February manufacturing data at 10 a.m. ET.

Auctions will be held Monday for $45 billion of 13-week bills and $39 billion of 26-week bills.

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