NEW YORK: The yield on the benchmark 10-year US Treasury note fell to a five-month low on Monday on investor fears that the spread of the Delta variant of the coronavirus could impede global growth and the reopening of economies.
The 10-year yield fell 8.7 basis points to 1.212%, a low last seen in February.
The yield on the 30-year Treasury bond slid 9.1 basis points to 1.839%.
The fundamental drivers of the bond market point to higher yields, not lower yields, said Stan Shipley, macro research analyst at Evercore ISI in New York.
"But the wild card that we've had to deal with for the last year and a half is the coronavirus and now the variant," he said. "Most data on the variant unfortunately is deteriorating, so people are scrambling for safety until they can figure out what's happening."
The Delta variant's spread sparked risk-aversion, pushing bond yields lower and leaving stocks facing their longest losing streak since the pandemic first hit global markets 18 months ago.
Japanese stocks fell for a fourth straight session as the variant hit sentiment, England's "freedom day" ending COVID-19 lockdowns was marred by surging infections and Australian officials said Victoria state would extend a lockdown to slow variant's spread.
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There is a concern globally that we may be on the verge of another step back that can hold back growth and hamper the recovery, said Gennadiy Goldberg, interest rate strategist at TD Securities in New York.
"That's the sentiment that's driving the rates market today, the expectation that may we'll slip back a little bit after all the progress we've made," he said.
A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 100.2 basis points.
The two-year US Treasury yield, which typically moves in step with interest rate expectations, was down 1.9 basis points at 0.208%.
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The breakeven rate on five-year US Treasury Inflation-Protected Securities (TIPS) was last at 2.485%.
The 10-year TIPS breakeven rate was last at 2.29%, indicating the market sees inflation averaging 2.3% a year for the next decade.