Treasuries had their biggest monthly gain since the depths of the 2008 crisis. The 30-year yield fell 56 basis points (bps) to a record low 1.97%, and shorter maturity yields also fell to multi-year lows. The 10-year rate ended the month lower by 50 bps, to 1.50%, and 2-year yield fell 36 bps, to 1.53%, leaving the slope between 2s and 10s, one of the most watched signals of an impending recession, almost perfectly flat.
Further escalation in trade rhetoric, spurred by President Trump’s threat to increase tariffs on Chinese imports, sparked fears of a worsening global slowdown. Brexit uncertainty and pro-democracy protests in Hong Kong also kept demand firm for Treasury securities.
Meanwhile, U.S. economic data held up quite well, with the consumer continuing to spend and remain confident, buoyed by solid job growth and healthy balance sheets. However, trade tensions have weighed on business confidence and caused a step back in investment spending.
Strong technical demand has also helped drive rates lower. With about 30% of global debt yielding below zero, there is seemingly an insatiable demand for yield, and we believe this support for U.S. dollar assets will likely continue.