Fed funds futures are now pricing in around 30 basis points of easing by the end of 2019, suggesting at least one quarter-point cut and possibly more from the US central bank.
What about when the two-year bond yields more than the 10-year bond? Unprecedented central bank stimulus may have also altered the curve dynamics, making an inversion a less clear signal of economic weakness than in the past. True, the 10-year yield has dropped below the top end of the Fed's benchmark rate-but if economic growth comes in close to the Fed's forecast of 2.1% for 2019, it's hard to imagine a deeper inversion is in the cards.
Oil prices hovered below their recent four-month peaks, as the prospect of tighter US crude supply was offset by concerns about a slowdown in global economic growth.
The high yield was around one basis point below where the notes traded before the auction.
Fed funds rate futures are now fully factoring in a rate cut later this year, with about an 80 percent chance of a move priced in by September.
By comparison, TLT, which owns Treasuries with maturities of more than 20 years, is yielding 2.79%.
Even though the idea is controversial, the imbalance between low investment levels and households savings despite the low-interest rate levels may strengthen this explanation.
Monetary policy in Europe appears poised to support global debt as well. However, a central bank pause is the responsible thing to do, Fed Bank of Boston president and CEO Eric Rosengren said at a conference in Hong Kong.
"The race to the bottom continues for government bond yields", Fawad Razaqzada, a technical analyst at Forex.com, wrote in a note. "Central banks have turned dovish in recent months owing to evidence of a slowing global economy".
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Haven demand was also spurred by some concerns in emerging markets, with the Turkish lira plunging as traders grappled with the government's curbs on trading the currency.
The Treasury Department will sell $US113 billion in coupon-bearing supply this week, including $US40 billion in two-year notes on Tuesday, $US41 billion in five-year notes on Wednesday and $US32 billion in seven-year notes on Thursday.
Data on Tuesday showed US homebuilding fell more than expected in February as construction of single-family homes dropped to near a two-year low, while concerns over the economy were underscored by other data showing consumer confidence ebbing in March. In the case yields continue lower, high-duration funds will likely do the best.
Bonds recouped much of their earlier price weakness after data showed US homebuilding fell more than expected in February, while consumer confidence also ebbed in March.
Market Hesitation Binky Chadha, a strategist at Deutsche Bank AG, has indicated that the move in yields and rate-cut bets may have its limits, and could even reverse.
"The market is anticipating that there is going to be dovishness from (the Reserve Bank of New Zealand) because there has been dovishness from other developed market central banks", said Thierry Wizman, global interest rates and currencies strategist at Macquarie Limited in NY.
A closely watched segment of the U.S. In the lead-up to the economic downturn that began in December 2007, this part of the curve initially went negative about 23 months before the recession started. This particular awful condition is normally coined as the "Yield Curve Inversion". A normal yield curve is up-sloped, meaning that longer-term bonds generate higher returns than shorter-term bonds and is often correspondent to a period of economic expansion; a flat yield curve means longer-term bonds and shorter-term bonds return equally; and, likewise, a down-sloped, or inverted, yield curve means that longer-term bonds generate lower returns than shorter-term ones and is indicative of an economic recession, which is what happened last week. Central banks remain supportive, with the Fed on hold and the European Central Bank announcing more credit for European banks.
There's little standing in the way of lower Treasury yields the rest of this month, according to Jim Vogel, a strategist at FTN Financial.