(Bloomberg) -- The benchmark 10-year Treasury yield dropped below 2% for the first time since November 2016 after the Federal Reserve signaled it was ready to cut interest rates.
The yield slid as much as three basis points to 1.989%, amid a flurry of future purchases during Asian trading. Japan’s 10-year bond yield also dropped 1.5 basis points to minus 0.155%.
The Fed on Wednesday scrapped its use of “patient” in describing its approach to policy changes, roughly three months after bond markets began clamoring for lower borrowing costs. The dovish tilt comes after European Central Bank President Mario Draghi signaled that he’s ready to add monetary stimulus to contend with a slowing economy.
“Ongoing trade tensions, inflation remaining low -- there’s plenty of downward pressure for yields,” said Janu Chan, a senior economist at St. George Bank in Sydney. Still, “there’s a risk that some of the trade uncertainty could turn around, and put some upward pressure on yields,” she said.
Derivatives markets are now pricing in more than 25 basis points of easing at the Fed’s July meeting. The 10-year Treasury yield has slid almost 70 basis points this year as the U.S.-China trade war took its toll on the global economy and spurred investors to bet that the Fed would have to cut rates.