NEW YORK: US Treasury yields fell on Wednesday with 10-year yields hitting their lowest in over 2-1/2 years as euro zone yields tumbled on record lows on bets the European Central Bank's next chief would stay a dovish course to help the euro zone economy.
Expectations of more ECB stimulus under Christine Lagarde, who had headed the International Monetary Fund, when she takes over from Mario Draghi in November raised the prospect that global bond yields have room to fall, analysts said.
"Treasuries rallied in sympathy with European bonds on news IMF head Christine Lagarde will be nominated to become the next ECB President as she is expected to pursue dovish monetary policy," said Karl Haeling, head of capital markets sales at LBBW.
Reinforcing traders' perception of easy monetary policy was US President Donald Trump's nominations of Christopher Waller and Judy Shelton to the Federal Reserve Board. Both are seen as dovish in their policy stance.
At 10:29 a.m. (1429 GMT), benchmark 10-year Treasury yields were down 2.50 basis points at 1.952pc.
They touched 1.939pc earlier as 10-year German bund yields reached a record low at -0.399pc.
The Fed, the ECB and other major central banks are considering whether to embark on lowering interest rates and/or buying more assets to combat sluggish inflation, and slowing growth exacerbated by global trade tensions.
Even in the United States where its economic expansion hit a record run this month, there are signs of cooling.
Payroll processor ADP said on Wednesday US companies added 102,000 jobs in June, falling short of the 140,000 forecast by economists polled by Reuters. The prior month's figure was revised up to 41,000 from an originally reported 27,000 increase.
Meanwhile, the US trade gap widened to a five-month high in May, which was likely a drag on economic growth in the second quarter.
The growth of the vast services sector fell to its slowest pace since July 2017, the Institute for Supply Management said.
Amid these omens of a decelerating economy, traders fully expect Fed officials will agree to lower US interest rates by at least a quarter point at the end of July to preserve the longest economic expansion on record, based on CME Group's calculation of interest rates futures prices.
The US bond market will close early, at 2 p.m. EDT (1800 GMT), on Wednesday, ahead of the US July Fourth holiday on Thursday.
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