The Fed is not sure how it should react to the situation in China. (Hemera/Bram Janssens)

(Bloomberg) — Economists are reducing their forecasts for how far Treasury yields will rise this year as U.S. economic data fall short of their expectations.

They have lowered their year-end prediction for benchmark 10-year yields to 2.69 percent from 3.23 percent made six months ago, according to a Bloomberg survey of economists. Both figures are still above the current level of 1.93 percent. Treasuries gained Tuesday after a statement from the Reserve Bank of Australia highlighted slowing global economic growth.

See also: Yellen’s challenge: Nodding to markets without ditching forecast

A January rout in stocks led by Chinese shares combined with tumbling crude oil prices are raising concern global financial market turmoil will hurt the world’s largest economy and convince the Federal Reserve to postpone raising interest rates. The Citigroup Economic Surprise Index shows U.S. data are falling short of expectations by the biggest amount in almost eight months.

“Yields have a chance to go lower because commodity prices are still unstable,” said Will Tseng, an investor in Taipei for Mirae Asset Global Investments, which oversees $73 billion. “The U.S. economic data is OK, but not as strong as people expected.”

See also: A little more inflation would be good for everyone

The Treasury 10-year note yield fell two basis points as of 1:31 p.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 2.25 percent security due in November 2025 rose 6/32, or $1.88 per $1,000 face amount, to 102 28/32.

Mirae’s Tseng said the yield may fall below 1.90 percent in the first quarter, at which point he’d like to sell.

The Citigroup surprise index dropped to minus 50.50 on Monday, the lowest level since June 4. The MSCI All Country World Index of shares has fallen almost 6 percent this year, while crude oil dropped to a 12-year low in January.

Fischer uncertain

Fed Vice Chairman Stanley Fischer said Monday it’s too difficult to gauge the impact on the U.S. economy from recent turmoil in financial markets and uncertainty over China, leaving policy makers undecided about what to do next. The odds the Fed will follow its December rate increase with another one in 2016 are about 63 percent, futures contracts indicate.

See also: Four Fed rate increases in 2016? Its peers say no

The Australian central bank held its main interest rate at a record-low 2 percent and repeated that low inflation may provide scope to cut interest rates if needed. The nation’s 10-year yields were little changed at 2.62 percent, three basis points away from a three-month low.

“The global economy is continuing to grow, though at a slightly lower pace than earlier expected,” Governor Glenn Stevens said in a statement.

The Australian dollar and Asia stocks fell, boosting Treasuries.

“There’s a flight to quality,” said Toshifumi Sugimoto, the chief investment officer at Capital Asset Management in Tokyo.

See also:

Why the middle market is too important to ignore

Here’s what 7 years at zero rates have looked like

 

Are you following us on Facebook?

Copyright 2018 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.