US bond yields lowest since February as growth fears return

US Treasury yields fell broadly on Thursday to their lowest levels since late February as declining oil prices and fears about slowing global economic growth underpinned bond prices. The fall in yields was also helped by a reversal in investors' appetite for risk from Wednesday, analysts said. After a rally that saw crude futures rise more than 5 percent and the S&P 500 index close more than 1 percent higher, markets reversed course on Thursday. Oil slipped around 1 percent and Wall Street stocks were down 1.5 percent.
Minutes from March's US Federal Open Market Committee meeting released Wednesday at 2 pm (1800 GMT) highlighted concerns about the Federal Reserve's limited ability to tackle a global economic slowdown, reducing the odds of a rate increase this year. "People are now processing the information," said Evercore ISI strategist Stan Shipley in New York on the response to the Fed minutes. "And then obviously from reading those minutes, this board remains more dovish based on the global concerns than they were before."
The Fed had forecast raising rates four times in 2016 when they tightened for the first time in December, but weak readings on various economic indicators since then have lowered inflation expectations and pushed back the Fed's expected hike schedule. Fed Chair Janet Yellen last week added to doubts about the Fed's continuation of rate hikes when she expressed concerns about the threat of weak global growth on the US economy, saying the Fed should look to "cautiously" raise rates.
Fed funds futures rates show investors see virtually no chance for an interest rate hike this month, which would move the next possible tightening move to the Fed's June 14-15 meeting. That is less than two weeks before the United Kingdom's referendum on leaving the European Union, an event that has caused its own share of market volatility. "This is all going to be very complex and people are saying 'There are too many moving parts,' and then as a consequence, 'Let's go for safety again,'" Shipley said.
The renewed bids for bonds pushed most Treasury yields to their lowest levels in six weeks. Prices on 30-year bonds rose by more than 1 point, dropping the yield to 2.517 percent. Benchmark 10-year Treasuries rose 17/32 in price to yield 1.696 percent, their lowest since February 24 and down more than 5 basis points from late on Wednesday.