US yields can tumble to 1.75% on trade meltdown

Bloomberg

Treasury 10-year yields may drop to 1.75 percent by year-end if the US-China trade war goes full throttle, says Western Asset Management.
Yields may keep falling even though they have already tumbled to about 2.10 percent from a seven-year high of 3.26 percent set in October, according to portfolio manager Mark Lindbloom. The trigger: a cocktail of lower inflation, cooling global growth and a worsening in US-China trade tensions.
“There’s nothing special about 2 percent for 10-year notes,” Lindbloom, who co-manages a fund that beat 97 percent of its peers in the past year, said in an interview in Singapore. “If we were to go down that path, we would be quick to add duration.”
Federal Reserve policy makers will meet on Tuesday and Wednesday to set rates, with many economics and bond traders ratcheting up bets they will ease this year to boost the economy. Futures traders have priced in about a quarter point of easing next month, and more by year-end. Strategists at Cha-rles Schwab Corp. and UBS Group AG say traders may be wrong to factor in only negative trade outcomes that would spur an imminent reduction in borrowing costs.
Lindbloom agrees the market may have “gone ahead of itself” in pricing such aggressive expectations of Fed cuts. “We think we’re going to get at least one cut this year,” he said.