U.S. Treasury yields hit lowest since late 2017, global stocks fall

Marco Green
March 26, 2019

Historically, an inverted yield curve - where long-term rates fall below short-term - has signalled an upcoming recession.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., March 22, 2019. So, in normal circumstances, yields of 10-year treasury papers should be more than three-month yields of Treasury bills. Wall Street shares were little changed on Monday with the S&P 500 ending with a small loss of 0.08 per cent. "I think the market has overreacted to the yield curve inversion because the San Francisco Fed has said it is the most reliable indicator", said Hiroshi Nakamura, senior manager of investment planning at Mitsui Life.

"You are at a point now where a drop in yields isn't being perceived as being a good thing for stocks".

On Wall Street, the Dow Jones Industrial Average fell 66.95 points, or 0.26 percent, to 25,435.37, the S&P 500 lost 8.77 points, or 0.31 percent, to 2,791.94 and the Nasdaq Composite dropped 40.64 points, or 0.53 percent, to 7,602.02. Chinese shares were also in the red with the blue-chip CSI 300 index down 1.4 percent. South Korea's Kospi index declined 1.7 percent while Australian shares faltered 1.1 percent.

The 10-year Canada yield, which touched its lowest intraday level since June, 2017, at 1.532 per cent, traded 4.4 points further below the yield on the 3-month T-bill. Gold has gained almost 2 percent since prices based on March 7 as global growth forecasts continue to be revised lower.

On March 22, the United States 10-year treasury yields slipped 10 basis points (bps) to 2.44 per cent, lower than the 2.46 per cent yields on three-month Treasury bills. Such an inversion is a warning sign about the economy.

US economic growth could be "pretty weak" in the first quarter but will likely much closer to 2-2.5 percent for the rest of the year, but a central bank pause is the responsible thing to do, Fed Bank of Boston president and CEO Eric Rosengren said at a conference in Hong Kong.

The dollar index, which measures the greenback against a basket of currencies, fell 0.12 percent, with the euro down 0.01 percent to $1.1311.

USA crude fell 1.27 percent to $58.29 per barrel and Brent was last at $66.59, down 0.66 percent on the day.

The price of gold has risen to its highest level since February and pushed XAUUSD month-to-date performance back into positive territory.

Gold was down a third of a percent at $1,317.60, but not far off a near one-month peak of $1,324.60 scaled during the previous session.

Other reports by Click Lancashire

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