Treasury yields fall to lowest level in almost two weeks on growth worries

BY Reuters | ECONOMIC | 06/23/22 05:02 AM EDT

LONDON, June 23 (Reuters) - U.S. Treasury yields fell to their lowest levels in almost two weeks on Thursday, as data from the euro area stoked worries about a sharp slowdown in the global economy.

Euro zone business growth has slowed significantly this month - and by much more than expected - as consumers concerned about soaring bills opted to stay at home and defer purchases to save money, a survey showed on Thursday.

In London trade, the 10-year Treasury yield fell to 3.087 % , its lowest level in almost two weeks. It was down 6 bps on the day and followed sharp falls in bond yields across the euro area.

Two-year Treasury yields fell back below 3%, also touching their lowest level in almost two weeks, while five-year bond yields were down around 6 bps on the day at 3.15% .

S&P Global's flash euro zone Composite Purchasing Managers' Index (PMI), seen as a good gauge of overall economic health, slumped to 51.9 in June from 54.8 in May, far below the 54.0 predicted in a Reuters poll.

"The focus is shifting toward growth worries, (Federal Reserve chief Jerome) Powell has mentioned recession risks and today we have the PMI data," said Jan van Gerich, chief analyst at Nordea. "This a potential turning point for bond markets but I'm not sure we're there quite yet."

Since hitting its highest since 2011 early last week, the benchmark 10-year Treasury yield has tumbled around 40 bps, highlighting investor uncertainty in the wake of aggressive monetary tightening from the Federal Reserve. (Reporting by Dhara Ranasinghe; editing by Sujata Rao and Jane Merriman)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.