BLOOMBERG. Global negative-yield pool deepens as treasuries rally to record

Treasuries rallied, with yields resuming a descent to record lows, as the growing pool of negative-yielding debt worldwide boosted the appeal of U.S. securities.
Benchmark 10- and 30-year yields fell to unprecedented levels, extending gains in Treasuries for a third trading session, as signs of slowing growth in Europe ended a five-day rally in global stocks. A U.S. jobs report July 8 may offer clues to the direction of the Federal Reserve’s next interest-rate move.
The probability in futures markets of tighter U.S. policy this year plunged after the U.K. vote last month to leave the European Union clouded the outlook for global growth. The dimming prospect of a Fed hike has spurred a torrent of demand for Treasuries, with almost $10 trillion of securities in the Bloomberg Global Developed Sovereign Bond Index yielding less than zero, up from about $9 trillion a week ago. In addition to experimenting with negative rates, some monetary authorities abroad are buying government debt, reducing the supply for investors who count on fixed-income assets.
“When you look at pension liabilities, insurance, where are you going to get a positive yield?” Jim Caron, a senior fixed-income portfolio manager at Morgan Stanley Investment Management, which oversees about $400 billion, said in an interview on Bloomberg Television. The yield on U.S. Treasuries “is not a lot relative to history, but at this point, it’s the best the market can do.”
The benchmark Treasury 10-year note yield dropped six basis points, or 0.06 percentage point, to 1.39 percent as of 9:48 a.m. New York time, after reaching a record-low 1.375 percent. The price of the 1.625 percent security due in May 2026 rose to 102 6/32.
The 30-year bond yield fell six basis points to 2.16 percent after touching an unprecedented 2.1395 percent, extending a bull market for Treasuries that began in the early 1980s, when yields on both 10-year and 30-year debt peaked above 15 percent.
Treasuries trading was closed globally July 4 for the U.S. Independence Day holiday.
Bull Market
“This is the most obvious manifestation of the global search for yield forcing investors further out the curve,” said Damien McColough, head of fixed-income research at Westpac Banking Corp. in Sydney. “The size of the drop in the 30-year yield reflects a bit of a capitulation trade, but I am not particularly surprised. The market is now trying to work out what the new range will be.”
The chance of a Fed rate increase by year-end stands at 12 percent, from 59 percent a month ago, according to fed fund futures data compiled by Bloomberg, as signs point to slowing global growth after the U.K. referendum. 
A measure of U.K. business confidence dropped sharply following the vote, a report showed on Tuesday. Across Europe, purchasing managers indexes for manufacturing and service showed lackluster growth.
That spurred a rally in debt across Europe, sending 10-year debt in Denmark and the Netherlands within five basis points of zero. In total, 10 developed countries have securities due in a decade that yield 0.2 percent or less.
Treasuries investors will watch this week for the Labor Department’s June payrolls report. Economists estimate employers added 179,000 positions last month, after an increase of 38,000 jobs in May, the least since 2010.
“Prior to the U.K. referendum, this payrolls report was considered one of the most important events to watch,” said Tomohisa Fujiki, the Tokyo-based chief rate strategist at BNP Paribas SA, who predicts the 10-year yield could drop to 1.35 percent in the near term. “It’s quite difficult to judge how low is too low for yields amid a slower outlook for global growth and recent demand for haven assets.”
http://www.bloomberg.com/news/articles/2016-07-05/treasury-yields-fall-toward-record-lows-as-payrolls-test-looms