US Treasury yields fell on Wednesday, as investors fretted about renewed weakness on Wall Street, which could signal much deeper problems in the world's largest economy. US 30-year, 10-year, and two-year yields dropped to two-week lows. Yields rallied earlier, bolstered by early gains in US stocks and continued optimism about Britain's exit from the European Union. But the direction has since changed, as US stock indexes fell, with Apple Inc leading a decline in technology stocks. The S&P 500 index also dropped for a fifth session in a row, led by financials.
"There is more thought that maybe there is something more to the stock market's weakness, that maybe it's starting to signal something about the economy, rather than just it being about trading or moving positions around," said Lou Brien, market strategist at DRW Trading in Chicago. In afternoon trading, benchmark 10-year Treasury note yields fell to 3.117 percent, from 3.145 percent late on Tuesday. Ten-year yields earlier dropped to a two-week low of 3.092 percent. "US Treasury yields are finally breaking lower to reflect distress in other markets that started Monday," said Jim Vogel, interest rates strategist at FTN Financial in Memphis, Tennessee.
"The build-up of two-way flows at 3.155 percent on 10s forced today's buyers to crack the 3.13 percent barrier that immediately gave way to 3.125 percent to rebalance technicals," he added. US 30-year yields slipped to 3.350 percent, after earlier sliding to a two-week trough of 3.334 percent, compared with Tuesday's 3.367 percent.
On the short end, US two-year yields fell to a two-week low of 2.837 percent, down from 2.895 percent on Tuesday. Two-year yields were last at 2.862 percent. Yields earlier gained some support from in-line US core inflation data for October, which should keep the Federal Reserve firmly on track to raise interest rates next month and a few more times in 2019.
Data showed on Wednesday that the US consumer price index rose 0.3 percent last month after edging up 0.1 percent in September. October's rise was the largest in nine months amid gains in the cost of gasoline and rents. Excluding the volatile food and energy components, CPI climbed 0.2 percent, after the so-called core CPI had gained 0.1 percent for two straight months.
Andrew Hunter, US economist at Capital Economics in London, said despite the rise in prices, the rest of the CPI report "supports our view that underlying inflation is unlikely to rise much further." Hunter noted that the Fed will still likely continue hiking rates once a quarter in the near term, with the next move coming in December, but Fed officials won't hesitate to back away from further tightening if economic growth slows.