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Further Yield Declines on Trade, Recession Uncertainties

'Bond yields registered another week of steep declines as recession concerns were stoked by further trade tensions and fears that weakness in overseas economies could eventually move stateside.   Yields fell by as much as 25 bps for the week with longer-dated bonds declining the most.  The most jarring move was on the 30-year Treasury, which hit its lowest yield ever on Thursday at 1.91%, before closing a bit higher at 1.97%.  That level of rates indicates that investors feel that the U.S. economy will be mired in a slow-growth scenario for the foreseeable future.

With overnight interest rates at only 2.0-2.25%, the Federal Reserve doesn't seem to have much ammunition available to fight a recession.  Nevertheless, market participants are convinced that the Fed will do whatever it can to stoke confidence in the economy as futures markets are pricing in 50-75 bps of additional easing this year.

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