US Treasuries Rally as Safe-Haven Demand Rises Following Dovish Remarks from New York Fed President

(New York=Yonhap Infomax) Jin Woo Choi – US Treasury prices advanced as investors sought safe-haven assets amid concerns over an artificial intelligence (AI) bubble and dovish comments from a key Federal Reserve official.

According to Yonhap Infomax’s overseas rates intraday screen (screen number 6532), as of 07:58 AM US Eastern Time on the 21st, the yield on the benchmark 10-year Treasury note stood at 4.0650%, down 4.00 basis points from the previous session’s 15:00 close.

The yield on the policy-sensitive 2-year Treasury fell 4.00 basis points to 3.5180% over the same period, while the 30-year Treasury yield declined 2.10 basis points to 4.7100%.

The spread between the 10-year and 2-year yields remained unchanged from the previous day at 54.70 basis points.

Treasury yields and prices move inversely.

Risk aversion intensified across equity markets, prompting a flight to safety into US Treasuries. “US Treasuries are benefiting from weaker risk appetite,” said a UK and Europe rates strategist at Toronto Dominion Bank.

At the close of trading on the New York Stock Exchange (NYSE) the previous day, the Dow Jones Industrial Average fell 0.84%. The S&P 500 index dropped 1.56%, and the Nasdaq Composite plunged 2.15%. The risk-off sentiment continued in Asian markets overnight, with South Korea’s benchmark KOSPI index tumbling 3.79%.

Dovish remarks from John Williams, President of the Federal Reserve Bank of New York, also supported Treasuries. Speaking at the Central Bank of Chile’s centennial conference in Santiago, Williams stated, “I still see the possibility of further adjustments to the target range for the federal funds rate in the near term to move policy closer to a neutral stance.”

Williams, who serves as Vice Chair of the Federal Open Market Committee (FOMC) and holds a permanent voting seat, contributed to a further drop in the 2-year Treasury yield, which touched an intraday low of 3.4910%.

According to CME FedWatch, as of 07:40 AM in New York, the federal funds futures market priced in a 64.4% probability of a 25 basis point rate cut by the Federal Reserve in December, a sharp increase of more than 25 percentage points from the previous day’s 39.1%.

jwchoi@yna.co.kr

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