Declining U.S. Treasury yields signal slower growth
Bad news for income-oriented investors? See how fast and far U.S. Treasury yields have declined in a single month in this week’s chart.
August 9, 2019 | 1 minute read
Government bond yields declined to multiyear lows this week as escalating trade disputes raised investor concerns about a slowdown in global growth. This week’s move came in the wake of the Fed’s late-July rate cut and similar moves by other central banks around the world.
Over the past month, short-term rates have seen a relatively steady decline as Fed policymakers grew increasingly accommodative and markets have come to expect additional rate cuts this year. Declines in shorter-dated Treasury yields were widely expected, as Fed policy typically exerts the most influence on the shorter end of the yield curve.
However, the declines in longer-dated Treasury yields have been comparatively steeper and generally merit greater investor attention. As the chart shows, the 10-year U.S. Treasury yield has dropped approximately 35 bps over the past month and is down more than 150 bps since November 2018.1
Amid rising trade tensions and volatility, recent movements across the yield curve indicate markets are now drawing a direct line from trade policy uncertainty to expectations of a weaker U.S. economy. Such an environment has the potential to lead to sustained volatility coupled with continued challenges for income-oriented investors.
Private credit has increasingly become the preferred source of financing for PE sponsors, with direct lending volume jumping 60% over last year’s level.
