A ‘Wild Day’ in the Bond Market Reflects Rising Recession Fears

Government bond prices soared on Friday as weak economic data out of the United States and Europe stoked concerns over slowing global growth.

Germany’s 10-year government bond yield, which moves in the opposite direction of its price, plummeted 0.19 percentage points, to around 1.02 percent, its biggest one-day decline in a month. In the United States, the 10-year Treasury yield, which underpins borrowing costs across the globe, sank 0.11 percentage points, to around 2.76 percent, extending a fall of 0.15 percentage points on Thursday.

“It’s been a wild day,” said Andrew Brenner, the head of international fixed-income at National Alliance Securities. “Fear of a recession is increasing.”

Both American and German government bonds are seen as safe places for investors to put their money in periods of worry, pushing prices higher and yields lower. The bonds also reflect investors’ expectations for the health of the economy.

Data out on Friday signaled slowing business activity in the United States and Europe, adding to fears of a recession and prompting a sharp pullback in expectations for further interest rate increases by the Federal Reserve.

Central banks around the world have been raising interest rates to slow demand and reduce stubbornly high inflation. But concerns have been mounting that tighter policies could go too far, pushing central banks to end their pursuit of higher interest rates and instead pivot to easing financial conditions.

Subadra Rajappa, the head of U.S. rates strategy at Société Générale, said the movements in government bond markets had been “quite spectacular,” and also puzzling. “It’s been a little bit of a head-scratcher,” she said.

Ms. Rajappa attributed the moves to “general skittishness” spurred by weakening economic data, a surprising suite of European Central Bank announcements on Thursday, and more technical reasons that pointed to the challenges of trading even the safest financial assets.

Gennadiy Goldberg, a rates strategist at TD Securities, said that on Thursday a large block trade — a big transaction, typically made by an institutional investor — helped to start the move in U.S. Treasury debt, and then weak data points added to the momentum. Markets have been “jumpy,” he said, especially in response to bad news.

“I don’t think it was any one thing — it was death by a thousand cuts for the Treasury market,” he said.

  • Elsewhere, stocks fell, weighed down by weak earnings reports from large technology companies like Snap and Twitter. Still, the S&P 500 closed out the week 2.5 percent higher, its best week since the end of June.

  • Oil prices gave up earlier gains, with Brent crude, the international benchmark, down 0.6 percent, to $103.20 per barrel.

  • The U.S. dollar slipped 0.3 percent against a basket of currencies of its major trading partners, closing out only its second weekly decline in the past eight weeks.

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