Wall Street swung higher on Wednesday as energy shares advanced, while US government debt maturing decades from now rallied anew in a fresh sign of deepening investor angst over the global economy.

The 30-year Treasury yield dropped as much as 6 basis points to a historic low of 1.905 per cent before paring its decline to 1.9414 per cent. Its 10-year counterpart was down 2.1 bps at 1.4693 per cent.

Wednesday’s fall in yields signals investors are shifting into longer-term US government debt — generally seen as an indication of expectations for weaker inflation and slower growth in the years ahead.

Treasuries at the shorter end of the curve saw a slimmer fall in yield. The shift caused a further inversion of key portions of the US yield curve in a sign that may sharpen market worries about a looming recession.

A graphic with no description

The two-year Treasury yield was 6 bps above that of the 10-year Treasury earlier this week, marking the deepest inversion of the yield curve since early 2007. This inversion held on Wednesday, with the two-year yield at 1.5060 per cent.

The inversion of the yield curve is seen by investors as a powerful indicator that a US downturn may be on the horizon. “The inversion is in danger of being locked in,” said Jim Reid, a research strategist at Deutsche Bank.

The rally in bonds and worries over Brexit did not faze US stocks, which received a boost from shares across the energy, consumer and industrial sectors.

Animation showing how the US yield curve has changed over the past 12 years. US Treasury yields have fallen and recently the curve has 'inverted' denoting that a recession may be imminent

Wall Street shed early losses to close near session highs, with the S&P 500 up 0.7 per cent as a decline in US crude stockpiles drove oil prices and energy shares higher. Utilities were the lone sector in the red, while technology shares underperformed. The tech-heavy Nasdaq Composite rose 0.4 per cent.

The Russell 2000, an index of small-cap companies, jumped 1.2 per cent.

Trading in the bond market ricocheted to European equities. The continent-wide Stoxx 600 index slipped 0.2 per cent, with bourses in Germany and France down around 0.3 per cent.

Trading volume for US Treasury bonds in the European secondary market was at a 30-day high, eclipsing €24.29bn, according to data from Trax.

In Asia, the Topix in Japan ended the day roughly flat while Hong Kong’s Hang Seng edged down 0.2 per cent while Australia’s S&P/ASX rose 0.4 per cent as miners gained. Over in mainland China, the CSI 300 was down 0.4 per cent.

Snapshot
Level+/- %
Dollar index98.25+0.3
EUR/USD$1.1077-0.1
GBP/USD$1.221-0.6
USD/JPY¥106.18+0.4
USD/CNYRmb7.1628+0.04
Brent crude$60.49+1.7
S&P 5002,887.94+0.7
FTSE 1007,114.71+0.4
DAX11,701.02-0.3
Topix1,490.35+0.04
US 10Y1.4693%-2.1bp
Bunds 10Y-0.712-1.9bp

Top markets stories

Markets Briefing is a concise look at global markets, updated throughout the trading day by Financial Times journalists in Hong Kong, New York and London. Feedback? Write in the comments below or send us an email.

Get alerts on Equities when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article