U.S. Treasury prices surged on Friday, pushing long-dated yields to fresh record lows, as worries that the coronavirus outbreak will hammer the world economy sent investors fleeing to assets seen as safe havens in turbulent times. A strong U.S. payrolls report did little to lift market sentiment. Nonfarm payrolls increased by 273,000 jobs in February, matching the prior month’s tally, which was the largest since May 2018. Data also showed that the economy created 85,000 more jobs in December and January than previously reported.
But economic data was overshadowed by escalating market panic over the coronavirus, which has infected more than 100,000 people globally, according to a Reuters tally. That number could rise as more people get tested. “The collapse in Treasury yields is historic, but this last decline was pretty easy as bond traders drove the 10-year down to match economists’ expectations that the Fed will deliver another 50-basis point cut at the March 18th meeting,” said Edward Moya, senior market strategist, at OANDA in New York.
Futures traders bet the Federal Reserve will slash U.S. interest rates to near zero by April. New milestones were set across the U.S. bond market, which has this week seen some of its biggest moves in years. The 10-year Treasury yield fell to a record low of 0.66% and was last down at 0.732%, on pace for its largest daily fall since October 2011 during the depths of the euro zone sovereign debt crisis.
The 30-year Treasury yield dropped more than 25 basis points to a record low of 1.208% and was last at 1.282%. It was also on course for its biggest daily fall since late 2011 Short-dated U.S. Treasuries also racked up sizable moves, with two-year yields falling more than 12 basis points to 0.394% , their lowest since October 2014. They were last at 0.462% Two-year yields have tumbled 89 basis points in the past two weeks in their biggest two-week drop since 1987. “We think we haven’t seen the bottom yet,” said Tony Rodriguez, head of fixed income strategy at Nuveen in Minneapolis. He said investors were trading blind because it is hard to gauge the risk the virus poses to the economy. “Absent better news on the virus, they (Fed) will cut (another) 50 basis points and get to zero over the next couple of months,” Rodriguez said. The prospect of a prolonged global economic slowdown smacked equity markets and with a weekend looming, investors headed for the relative safety of government bonds.