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Bond Report: Longer dated Treasury yields slide for second straight week on economic fears

Long-dated U.S. bond yields fell to their lowest levels in almost two months on Friday, while posting their second straight week of declines, on growing concerns the economy could tip into recession.

What’s happening
  • The yield on the 2-year Treasury note TMUBMUSD02Y, 2.990% declined 10.6 basis points to 2.989% from 3.095% as of Thursday afternoon. That’s the lowest since July 6, based on 3 p.m. levels according to Dow Jones Market Data. The yield is down 14.6 basis points this week.
  • The yield on the 10-year Treasury note TMUBMUSD10Y, 2.758% dropped 12.7 basis points to 2.781% from 2.908% on Thursday. The yield is down 14.8 basis points this week. 
  • The yield on the 30-year Treasury bond TMUBMUSD30Y, 2.975% fell 7.5 basis points to 2.996% from 3.071% in the prior session. The yield is down 9.7 basis points this week.
  • It was the lowest levels for the 10- and 30-year rates since May 27.
What’s driving markets

The rates team at BofA Securities lowered its year-end forecast for the 10-year yield to 2.75% from 3.5% last week, following its economics team’s call for a mild 2022 recession.

What analysts are saying

“While we haven’t penciled it in yet, there is a rapidly-growing risk of a global recession,” BofA Securities Global Economist Ethan Harris wrote in a note.  

“With each passing month, the underlying inflation picture is getting worse…  A big part of the problem is that even temporary (but sustained) price increases can leave a legacy of higher inflation expectations. Hence, increasingly, central banks need to do part of the dirty work of bringing inflation back down.”

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