Bond yields tumble as investors back away from stocks and commodities

Treasury prices climbed and yields tumbled on Monday as worries over China’s economy added to fears of a faster-than-predicted increase in U.S. interest rates sent investors out of perceived riskier assets.

What are yields doing?
  • The 2-year Treasury yield 

     fell 11 basis points to 2.604% from 2.713% at 3 p.m. Eastern on Friday, which was the highest since Dec. 14, 2018, according to Dow Jones Market Data. The rate rose 27.1 basis points last week, the largest weekly gain since the period that ended March 25.

  • The yield on the 10-year Treasury note 

     fell 8 basis points to 2.821% from 2.905% late Friday. It rose 9.7 basis points last week.

  • The yield on the 30-year Treasury bond 

    fell 6 basis points to 2.882% from 2.943% late Friday. It rose 2.6 basis points last week, marking its third-straight weekly gain.

What’s driving the market?

Bond yields surged on Friday, and the Dow Jones Industrial Average

saw its worst daily percentage drop since Oct. 28, 2020, as expectations for a faster pace of interest-rate hikes from the Federal Reserve spooked investors.

Read: Fed chief Powell backs moving more quickly on interest-rate hikes

But yields were reversing direction on Monday as investors sought the perceived safety of government bonds over fears of a lockdown in China’s capital city of Beijing, where millions are now being tested and some business districts have been placed under lockdown.

U.S. stock futures

and commodities

fell as worries over growth in China were added to fears faster Fed tightening might trigger a U.S. recession.

SeeHigh inflation is sapping the U.S. economy, S&P finds, and customers are balking at higher prices

Economic data will swing into focus for investors this week, with the March core personal-consumption expenditures price index, the central bank’s favored inflation indicator, due Friday. The data calendar is empty for Monday.

What are analysts saying?

“Financial markets quickly entered into risk-off mode after reports of new measures to contain a COVID-19 outbreak in Beijing stifled global growth concerns,” said analysts at UniCredit in a Monday note.

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