US 30-year bonds 'on fire,' sends yields to record low

NEW YORK: US Treasury yields fell on Wednesday, with 30-year yields setting all-time lows, as fears about a recession and trade tensions between China and the United States have stoked unrelenting demand for low-risk government debt.

The inversion of the US yield curve, where short-dated yields are running above long-dated ones, has also unsettled investors, as it often precedes a recession.

Investors added to their safe-haven holdings of Treasuries as UK Prime Minister Boris Johnson sought to limit parliament's opportunity to derail Brexit by suspending the House of Commons for around a month, starting in mid-September.

"Curve flattening continues in the US with the long bond on fire, clearly assisted by large block trades," NatWest Markets strategists wrote in a research note.

Those big-size trades may have occurred in the London session, they noted.

Secondary trading volume of US Treasuries in Europe hit a 30-day high, according to MarketAxess/Trax.

Meanwhile, the Treasury Department will hold two auctions later Wednesday: $18 billion in two-year floating-rate notes at 11:30 a.m. (1530 GMT) and $41 billion in five-year fixed-rate debt at 1 p.m. (1700 GMT).

At 9:07 a.m. (1307 GMT), the yields on 30-year government bonds were 1.916%, down 3.6 basis points from late on Tuesday. They hit an all-time low of 1.49% earlier Wednesday.

The 30-year yield is below 3-month T-bill rates, which has not happened since 2007.

As for the rest of the yield curve, the spread on three-month T-bill rates over 10-year yields widened to 55 basis points, a level not seen since March 2007, while the premium on 2-year yield above 10-year yield yields increased to 6.5 basis points, according to Refinitiv and Tradeweb data.