Treasuries posted their biggest weekly gain in five months as demand for fixed income soared amid a global selloff in equities and concern that inflation will slow.
Ten-year notes also drew support from signs the Federal Reserve will keep interest rates close to zero for longer, and from a decline in oil prices that helped push a gauge of inflation expectations toward its lowest since 2010. Government debt from Australia to Britain also gained this week, driving the average yield on developed-nation bonds to a three-month low.
“It’s money wanting to be put in dollars and Treasuries,” said Charles Comiskey, head of Treasury trading in New York at Bank of Nova Scotia, one of 22 primary dealers that trade with the Fed. “Until the Fed pulls the trigger, the market will have a hard time believing they will raise rates.”
The U.S. 10-year yield fell 16 basis points this week, or 0.16 percentage point, to 2.04 percent as of 4:59 p.m. in New York, according to Bloomberg Bond Trader data. The 2 percent security due in August 2025 rose almost 1 1/2 points in the period, or about $15 per $1,000 face amount, to 99 21/32.
The 30-year bond yield dropped 12 basis points to 2.72 percent.
The extra yield on 10-year Treasury Inflation Protected Securities over similar-maturity conventional notes, a measure of the outlook for consumer prices, touched 1.52 percentage points Friday, approaching the lowest since August 2010. Its five-year average is 2.15 percentage points.
Crude oil posted its eighth straight weekly loss, the longest stretch in almost three decades.
The average yield on developed-nation bonds fell to 1.04 percent Thursday from as high as 2.39 percent in 2011.
Spurring the appetite for bonds, an index of global stocks sank to the lowest since January as China’s unexpected yuan devaluation last week spurred concern the world’s second-largest economy is losing momentum. Kazakhstan, which is dependent on revenue from oil exports, abandoned control of its currency.
“The market is understandably cutting back on bets that rates will rise as early as next month,” said Jussi Hiljanen, head of fixed-income strategy at SEB AB in Stockholm.
Futures show that traders see a 32 percent chance the Fed will raise interest rates at its September meeting, down from a 48 percent probability at the end of last week. The gauge is based on the assumption that the effective fed funds rate will average 0.375 percent after the first increase.