Exchange traded funds that invest in safe havens such as U.S. Treasury bonds rallied Friday after the dismal August nonfarm payrolls report that showed job growth stalled last month.
Yields on the 10-year note briefly fell below 2% as investors flocked to U.S. government bonds despite the recent credit downgrade from Standard & Poor’s.
U.S. 30-year yields fell to the lowest level since January 2009, Bloomberg reported.
“The markets were expecting some positive rate of job growth, and with that not materializing, everyone wants the safety of Treasuries,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott, in the report. “The nonexistent job growth has decreased fear of inflation and replaced it with increased fear of recession.”
Further evidence of the strong “risk-off” trade was seen in ETFs indexed to oil and stock-market volatility.
The CBOE Volatility Index, Wall Street’s so-called fear gauge, rose nearly 7% on Friday.
The iPath S&P 500 VIX Short-Term Future ETN (NYSEArca: VXX) added 5%. The exchange traded note follows futures contracts based on the VIX.