The yield on the benchmark 10-year Treasury note fell to its lowest level since November 2016 on Wednesday, continuing its slide below 2% on expectations central banks around the world would respond to a slowing global economy with more monetary stimulus.
At around 8:17 a.m. ET, the yield on the benchmark 10-year Treasury note, which moves inversely to price, was lower at around 1.951%, off a low of 1.939% hit in overnight trading. The rate on the 3-month Treasury bill ticked down to 2.198%, keeping a portion of the yield curve inverted.
Traders around the world snapped up government debt after the European Councilon Tuesday nominated Christine Lagarde to head the European Central Bank. Many viewed the choice of Lagarde as a signal that euro zone rates will remain low for the foreseeable future as the ECB tries to foster inflation and GDP growth in the region.
Europe has seen markedly lower GDP growth relative to that of the U.S. in recent years. Economic forecasts have slumped further in recent months amid persistent tariff pressure from the Trump administration and cooler sentiment from manufacturers. The German 10-year bund fell to its lowest level in recorded history on Wednesday at -0.399%.
“The appointment of Christine Lagarde is certainly giving more adrenaline to the epic bubble of negative yielding bonds but the euro isn’t really moving,” Peter Boockvar, chief investment officer at Bleakley Advisory Group, wrote in an email.
“It remains quite astonishing to see what is going on in European bond yields, to say the least. God help us when this unwinds one day,” he added.
Fears of an economic slowdown in Europe were also exacerbated after the U.S. government on Monday threatened to impose tariffs on $4 billion of additional euro zone goods in a long-running dispute over aircraft subsidies.
The U.S. Trade Representative’s office released a list of products — including Italian cheese, olives and whiskey — that could be targeted with new duties on top of those implemented in April. The new wave of proposed duties comes amid a 15-year dispute at the World Trade Organization over aircraft subsidies given to U.S. aerospace manufacturer Boeing and its European rival, Airbus.
Treasury also caught a bid after President Donald Trump picked two nominees likely to support easier monetary policy at the Federal Reserve. Both of Trump’s intended nominees, Christopher Waller and Judy Shelton, are thought to be advocates of lower rates.
Lower rates could give a boost to job creation, which posted another rough month in June, according to a Wednesday report from ADP and Moody’s Analytics. Private companies added just 102,000 jobs last month, well short of the meager 135,000 estimate. That followed a weak May print of just 41,000 and precede’s Friday’s employment report from the Labor Department.
The Institute for Supply Management’s non-manufacturing index and Services PMI for June and factory orders for May will follow slightly later in the session.