US Treasury debt prices soared on Thursday as recession fears cued investors to flee riskier assets like stocks and seek safety in US government debt. Major US stock indexes plunged about 4.5 percent and the US bond market was on track for its sharpest week-long drop in yields since the height of the global financial crisis.
"The market is beset by uncertainty and fear," said Milton Ezrati, market strategist at Lord Abbett & Co in Jersey City, New Jersey, adding "there are alot of worries about the economy. The double-dip fears are more real now than last year - people are throwing in the towel because they can't find relief on any front."
The safety buying straddled the Treasury curve, with Treasury bill rates trading in negative territory, two-year note yields falling to record lows and longer-dated yields dipping to the lowest in nearly 10 months. Bank of New York Mellon Corp said it was being so overwhelmed with deposits from investors fleeing risky markets that it will begin charging for above-average deposits. Some traders said this added to the downward pressure on T-bill rates as investors looked for a place to stash their cash. Benchmark 10-year Treasury notes traded 1-24/32 higher in price to yield 2.42 percent, the lowest since mid-October and down from 2.63 percent late on Wednesday. Benchmark yields are set for the biggest six-day fall since December, 2008, and have shed over half a percentage point in the last week alone.
Thirty-year bonds traded with a yield of 3.69 percent, the lowest since mid-October and down from 3.90 percent late on Wednesday. Longer dated Treasuries have been especially bolstered in the recent rally and rising expectations of another recession could be seen in the Treasury yield curve, where the spread between yields on two-year notes and 10-year notes narrowed to 216 basis points, the slimmest since early November. On the shorter end of the curve, two-year notes traded 5/32 higher in price, their yield dipping to a record low 0.27 percent from 0.34 percent. Two-year note yields were trading with the narrowest gap to the Federal Reserve's recommended overnight lending range of zero to 0.25 percent, since the central bank cut rates to that level in December, 2008.