• 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.

1 Federal Reserve Bank of St. Louis, http://bit.ly/2J3ufoX.

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