Treasury yields dropped to a new record low, spurring yet another global rally in bonds in a tumultuous week as worry mounts over the U.S. spread of the COVID-19 virus.
Yields on U.S. 30-year debt fell as much as 9 basis points to 1.45%, while Australia's 10-year bonds sank to a low of 0.66%. Bonds from New Zealand to Japan to China rallied, while investors also bought the haven yen currency.
Pressure is mounting again on the Federal Reserve to add to its emergency rate cut when it meets later this month as the U.S. reports more cases. Traders looking for a stronger coordinated global policy response were left disappointed when Japan's Finance Minister Taro Aso said Friday the Group of Seven leading industrial nations won't rush to react to every market swing.
"Treasuries are the only place that has room for yields to fall further," said Eiichiro Miura, general manager of the fixed-income department of Nissay Asset Management Corp. in Tokyo. "Comments by Finance Minister Aso saying that G-7 won't rush to respond to market moves may also have accelerated the decline in Treasury yields this morning."
Treasury yields sank into uncharted territory this week after the Fed's emergency 50-basis-point rate cut raised the specter that the global virus fallout will be longer and be worse than anticipated. While central banks in Australia and Canada have also eased this week, other major policymakers have yet to act.
The 10-year U.S. yield fell another 7 basis points Friday to 0.84%. Yields in New Zealand and Australia also declined by another 10 basis points, while China's 10-year yield tumbled to the lowest since 2002.
In Friday's wild rally in Asian hours, Treasury traders in the region pointed to a lack of liquidity as one factor which exacerbated the size of moves. Sharp gains in U.S. ultra bond futures also caused circuit breakers to kick in, briefly halting trade.
Traders also pointed to fresh concerns stoked by a New York Times report that said more than 2,000 people in New York are in home isolation. The U.S. is reporting more cases throughout its states on a daily basis.
"The long end of the curve is falling as well as the short end, indicating that the market is pricing in a recession and that Fed cuts are not enough to save the decline in activity," said Eugenia Victorino, head of Asia strategy at SEB AB. "Even if China is coming back online, the other major economies are now just seeing the impact of the outbreak on their own activity."
Federal Reserve Bank of Dallas President Robert Kaplan said the virus spread would be weighed by policymakers when they meet later this month.