US Treasury yields fell to their lowest levels since September 2017 on Monday as investors piled more cash into low-risk debt to seek protection from market volatility due to growing trade conflicts between the United States and its trade partners.
Bond yields tumbled also on expectations of an imminent rate cut from the Federal Reserve in a bid to stabilize markets and the economy with manufacturing growth cooling to its weakest pace in 2-1/2 years in May.
"It's just that things seem to be getting bad enough every day that the Fed is going to cut," said Gennadiy Goldberg, US senior interest rates strategist at TD Securities.
The near $16-trillion sector produced a total return of 2.35% in May, its strongest monthly showing since August 2011, according to an index compiled by Bloomberg and Barclays.
Long-dated Treasuries generated a stellar 6.7% return, their juiciest performance since January 2015, as the safe-haven market rally knocked 10-year yields some 36 basis points lower last month. In just a month they leapfrogged junk bonds as the best performing US bond sector so far this year.
Treasuries were among the top assets in the world in May. They handily beat stocks but trailed the yen somewhat.
At 3 p.m. EDT (1900 GMT), benchmark 10-year Treasury yields fell 6.10 basis points to 2.081% after hitting 2.071%, their lowest level since September 2017. Ten-year yields were set for their biggest two-day fall in just over a year.
Two-year yields declined 10.20 basis points to 1.842%. They touched 1.838% earlier Monday, which was their lowest since December 2017.
Two-year yields were on track for their biggest two-day fall since October 2008 when they declined by nearly 35 basis points.
Shorter-dated yields have tumbled on a growing conviction that the Fed would lower key rates more than once before year-end to stave off a recession.
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