NEW YORK: US benchmark 10-year Treasury yields on Thursday dropped below 2pc for the first time in more than 2-1/2 years, while other maturities fell to multiyear lows as well, a day after the Federal Reserve flagged interest rate cuts as early as next month.
US 30-year yields likewise plunged to their lowest since October 2016, while those on two-year notes slid to their weakest level since mid-November 2017.
Growing tensions with Iran added to the bid in Treasuries as well. The United States is pursuing a campaign to isolate Iran to contain its nuclear and ballistic missile programs and limit its role in regional wars.
But the interest rate outlook has been the primary focus.
The Fed on Wednesday signaled cuts as early as July and by as much as half a percentage point, saying it was ready to battle growing global and domestic economic risks amid rising trade tensions and weak inflation.
"The statement indicated the Fed no longer insists on a pause or patience, providing an open ear to doves at upcoming meetings. Also critical ... acknowledgment that inflation pressures are muted," said Jim Vogel, interest rate strategist, at FTN Financial in Memphis, Tennessee.
In afternoon trading, US 10-year note yields fell to 2.0pc from 2.027pc late on Wednesday. Earlier in the global session, 10-year yields fell to 1.974pc, the lowest since November 2016.
Yields on US 30-year bonds slipped to 2.53pc, from 2.54pc on Wednesday. They fell as low as 2.48pc, a level last touched in late October 2016.
At the short end of the curve, US 2-year yields slid to 1.696pc, the lowest since mid-November 2017, from Wednesday's 1.766pc. They were last at 1.73pc.
"The near-term bias is toward lower yields because we have a few risk events to get through, such as the G20 meeting and overall just digesting the dovish Fed," said Subadra Rajappa, head of US rates strategy at Societe Generale in New York.
"I think the focus from now on is inflation and inflation expectations," she added.
US data showing factory activity in the mid-Atlantic region stalling in June, likely a result of recent trade tension between the United States and China, also added to the pressure on yields.
The US current account deficit was also wider than expected at anticipated at -$130.4 billion in the first quarter, another black mark for the economy.
Fed funds futures traders saw a 100pc chance the Fed would cut interest rates by a quarter point to 2.00pc-2.25pc next month, and a 67pc possibility of a 75 basis-point easing by year-end CME Group's FedWatch showed.
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