WASHINGTON — Fear and uncertainty about the global economy are leading investors to embrace the relative safety of U.S. government debt and slashing yields to record lows.
Interest paid on the 10-year Treasury note reached 1.34 percent early Wednesday, just below the previous record set in 2012. Historically, when concerns have flared about a potential recession, investors have shifted money into havens such as U.S. Treasury and sent yields falling.
The market’s signal this time seems somewhat hazier than usual, and there’s far from any consensus among economists that a recession is approaching.
As recently as the start of June, the yield on the Treasury note was 1.85 percent. Then the U.S. government issued an anemic May jobs report. And Britain voted to abandon the European Union — a move that caught markets off guard and magnified concerns about the global economic order.
What makes the record-low Treasury yield something of an oddity is that the U.S. economy — the world’s largest — still looks relatively sturdy, far more so than most other major economies. But yields on other nations’ debt are even lower. Yields on German and Japanese debt, for example, are negative. So foreign investors still get a smidgen of a return by buying Treasury notes.
All those factors have raised a host of questions: Are investors bracing for a global downturn? Will the United States remain an economic haven and benefit from the influx of capital? Does U.S. debt simply deliver a better return than foreign debt? Might inflation veer closer to zero?
In this case, the answer might be all of the above.
“There are a lot of factors conspiring to push the yield down to unprecedented levels,” said David Joy, chief markets strategist at Ameriprise Financial.
Other market analysts detect newfound signs of caution. They see uncertain investors seeking to shield themselves from the risks of the unknown.
JOSH BOAK
