By Matt Wirz
U.S. Treasury yields fell sharply Friday as a flight to safety drove global investors into the government securities.
The intraday yield of the benchmark 30-year bond fell to a record of 1.889%, well below the previous all-time low of 1.905% in late August, according to data from Tradeweb. The bond yield later rebounded to close at 1.917%, still down from 1.971% on Thursday.
Treasurys have been rallying since mid-January on fears that the coronavirus will slow economic activity. However, that isn't the only factor behind the buying. U.S. institutional investors are also purchasing long-term Treasury bonds as a hedge against the risk that rates will fall further, analysts said.
"Investors are going out the curve and buying duration," said Justin Lederer, an interest-rate trader at Cantor Fitzgerald LP.
Bond duration -- or sensitivity to moves in interest rates -- is higher in longer-term bonds and sharp moves in the 30-year bond reflects change in traders' expectations of where yields will move in the future. The so-called long bond hit its last low mark in mid-2019, when increased trade tensions between the U.S. and China stoked concerns that global growth would slump.
"When we hit new lows in Treasurys then hedging has to pick up," said Priya Misra, head of global rates strategy at TD Securities.
Expectations that rates will fall further prompts investors in mortgage debt to buy more Treasurys to hedge against the risk that homeowners will refinance and prepay the loans, Ms. Misra said. Insurers also need to increase the number of Treasury bonds they hold to offset the future payments they expect to pay out to policyholders, she said.
The 10-year Treasury note also rallied Friday and its yield fell to 1.470% from 1.524% on Thursday, according to data from Tradeweb.
The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, fell Friday to around 92.18 from 92.55 Thursday. The decline comes after a 7-day rally in the dollar that had some analysts calling the U.S. currency overvalued.
Sam Goldfarb contributed to this article.
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