US yields fall to six-month lows on recession worries

SINGAPORE: US Treasury yields slid to multi-month lows on Friday, after President Donald Trump’s larger-than-expected wall of tariffs around the world’s largest economy stoked recession fears and sent traders ramping up bets of more Federal Reserve rate cuts.

Investors flocked to the safety of bonds globally after Trump revealed on Wednesday his long-anticipated tariffs plan, which included a 10% minimum tariff on most goods imported into the country, with much higher duties on dozens of countries.

The move sent the benchmark 10-year US Treasury yield sinking to a six-month trough of 3.9700% in the Asian session on the day, extending its 14-basis-points slide from Thursday. Bond yields move inversely to prices.

The two-year yield similarly slid more than 10 bps to bottom at 3.6170%, the lowest since October, while the five-year yield hit a six-month trough of 3.6600%.

“No doubt, the probability of recession has risen,” said Robert Tipp, chief investment strategist and head of global bonds at PGIM Fixed Income. “In the event of a downturn, credit spreads may widen, but bond returns will be boosted by declining Treasury yields.”

US yields dip as Trump keeps markets on edge on tariffs

Reflecting the heightened worries of a global recession, particularly in the US, expectations of more aggressive Fed rate cuts this year have risen, with traders now pricing in more than 100 bps worth of easing by December.

Following Wednesday’s tariff announcements, Nomura revised its forecast and expects the Fed to deliver one rate cut in December, compared with none previously. Meanwhile, J.P. Morgan has raised the probability of a recession in the global economy to 60% from 40% by the year-end.