By Sam Goldfarb and Gunjan Banerji
The yield on the benchmark 10-year U.S. Treasury note fell below 1% for the first time Tuesday, extending a remarkable 2020 decline in the world's most important interest-rate market.
The decline came as uncertainty over the impact of the coronavirus epidemic on the global economy continued rippling through markets, pushing the Dow industrials to a 700-point decline, on track for their eighth loss in nine trading sessions.
In recent trading, the 10-year yield was 0.993%, according to Tradeweb. The latest declines came after the Federal Reserve moved sooner than expected to cut interest rates, citing the likelihood that the virus outbreak will slow global growth in coming periods.
The 10-year yield was down from 1.085% at Monday's close, after setting a record intraday low of 1.031% earlier that day. At the start of 2020, the all-time record closing low was 1.365%, set in 2016.
Bond yields started the U.S. trading session sightly above levels from Monday but took a sharp turn downward shortly after the Fed announced it was cutting its key policy rate by half a percentage point -- its first between-meeting move since the financial crisis.
The move in yields mirrored the one in stocks, which fell shortly after the Fed's announcement and extended declines after Fed Chairman Jerome Powell acknowledged the limits of the central bank's actions in a news conference.
Many investors and analysts had expected yields to bounce from their lows at the end of last year as the outlook on the economy brightened. Government bonds and stocks concurrently notched huge gains in 2019 and investors predicted that their lockstep moves would diverge.
Instead, fears about global growth led investors to keep pouring money into Treasurys, causing the 10-year yield to fall to record lows last week.
The rapid slide in Treasury yields caught many off guard, fueling hedging activity and forcing investors that had bet against the government-bond rally to close out their positions, analysts said, giving even greater fuel to the bond rally.
Traders who expected rates to rise "were caught offside," said Arthur Bass, a managing director at Wedbush Securities. "The move happened a lot quicker and a lot further than they thought."
Write to Sam Goldfarb at email@example.com and Gunjan Banerji at Gunjan.Banerji@wsj.com