Yields tumble to two-week lows on recession fears

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NEW YORK — U.S. Treasury yields fell to

two-week lows on Thursday on concerns that the Federal Reserve

will cause a recession by aggressively hiking interest rates,

and on a growing belief that yields may have topped for the near

term even if inflation stays high.

Yields have dropped from more-than-decade highs reached

before last week’s Fed meeting, when the U.S. central bank hiked

rates by 75 basis points, the biggest increase since 1994, and

signaled a similar move is possible in July.

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Fed Chairman Jerome Powell will testify before Congress for

a second day on Thursday, a day after saying the Fed is not

trying to engineer a recession to stop inflation but is fully

committed to bringing prices under control even if doing so

risks an economic downturn.

There are “growing recession fears,” said Benjamin Jeffery,

an interest rate strategist at BMO Capital Markets, noting that

Powell’s tone on Wednesday was “a bit more cautious.”

As concerns about a recession increase, Jeffery says 10-year

yields could drop back to the 2.50%-to-2.75% area, “especially

if we started to see even more concerning economic data and even

maybe some slowing in terms of hiring.”

Benchmark 10-year yields were at 3.111%, after reaching

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3.498% on June 14, the highest since April 2011.

Two-year Treasury yields fell to 2.994%. They have been down

from 3.456% on June 14, which was the highest since November

2007.

The closely watched yield curve between two-year and 10-year

notes was at 12 basis points, after inverting

early last week. An inversion in this part of the curve is seen

as a reliable indicator that…