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Bonds rally, the chance for a rate cut are now 75%
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Loading...Government bonds continued today with their rally, suppressing returns. Investors have begun to rely on the possibility that the Federal Reserve will cut interest rates this year in response to the slowdown in global growth.
10-year bond yields dropped by about 7.2 basis points (0.072%) to 2.3507, a level that was last reached in December 2017. Today's slump to turn march into one of the worst for bonds since 2016. Since the beginning of the year, yield has fallen by 33 basis points. Returns fall when prices rise on bonds.
Yields on more sensitive bonds, such as biennial, were even higher with a fall of 10.6 points to a 13-month low.
German government debt, which is a benchmark for Europe, has also risen today. The yield on the 10-year Bund sank 5.6 points to -0.07%. Today, for the first time since 2016, German debt of negative yield was also sold.
Since bad news from Europe last week, pointing to weakness in global growth, investors have also begun to appreciate increasing the chances for the Fed to cut interest rates for the first time since 2008 to keep the US economy " .
The inversion of 3-month and 10-year bonds last week has also added to the already perturbed mood of investors. Such a crossing is usually taken as a signal of an impending recession that frightens market participants.
Currently, the odds for the cut rate are estimated at 75% before the end of this year. Last week, this chance was 39%.
Source: Financial Times
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