The latest eruption in the U.S.-China trade dispute pushed a widely watched Treasury-market recession indicator to the highest alert since 2007.
Rates on 10-year notes sank to 1.74% on Monday, close to completely erasing the surge that followed President Donald Trump’s 2016 election. In early trading, they fetched as much as 32 basis points less than three-month bills, the most extreme yield-curve inversion since just before the 2008 crisis.
The move follows reports that China is responding to the U.S. president’s threat of more tariffs by allowing the yuan to fall and halting imports of U.S. agricultural products. Many major investors expect this slide in 10-year yields to continue given the risk this creates for markets.
Count BlackRock Inc., the world’s largest asset manager, among them. The firm’s global chief investment officer of fixed income, Rick Rieder, foresees 1.5% for the 10-year.
“We could be in a significantly lower-rate environment for a while” given that central banks are poised to ease, he told Bloomberg Television on Monday.