U.S. 10-year Treasury yield falls…"Recession signal"

Treasury yields fall to around an annual 4%

"Reflecting concerns over slowing U.S. economic growth"

The U.S. 10-year Treasury yield, which nearly reached an annual 5% earlier this year, has fallen to around an annual 4%, raising market concerns. Forecasts of a slowdown in U.S. economic growth, the possibility of interest rate cuts by the U.S. central bank (Fed), and concerns about its independence have been cited as factors driving the decline in yields.

The U.S. 10-year Treasury yield, which had risen to an annual 4.8% on January 13 (one week before President Donald Trump's inauguration) based on the closing price, fell to around an annual 4.05% on the 8th (local time). It is near this year's low and has fallen more than 0.5% percentage points since January. When long-term yields fall, corporate financing and borrowing costs decrease, which can be positive for stock values. However, it can also be interpreted as meaning that confidence in the U.S. economic outlook has weakened. Derek Tang, an economist at Monetary Policy Analytics, told MarketWatch, "The current 10-year Treasury yield can be seen as an indicator of a recession."

Bank of America strategists projected that the 10-year Treasury yield will remain at an annual 4% by the end of this year after last week's weak August employment data release. This is a downward revision from the previous forecast of an annual 4.25%. Will Kompernol, an FHN Financial strategist, said, "The entry into a growth slowdown environment has been reflected in the decline of the 10-year Treasury yield," adding, "It is more likely to be interpreted as a risk-averse tendency rather than a positive signal for the stock market."

New York=Park Shin-young correspondent nyusos@hankyung.com