(Bloomberg) -- Global bonds climbed for a second session Tuesday as investors sought out havens amid mounting fears of a US recession.

The benchmark 10-year Treasury yield fell as low as 2.96% -- back under the closely watched psychological level of 3% and around where it was before Friday’s stronger-than-anticipated US jobs data. Australian 10-year yields slumped over 10 basis points, while futures for Japanese and German debt pushed higher. 

The risk-off sentiment was evident in other markets, as US equity futures dropped along with Japanese stocks and the euro came within a whisker of falling to parity against the dollar for the first time in 20 years. 

The sharp pullback in yields this week has maintained a recent pattern of volatile swings in bonds amid constrained liquidity. Federal Reserve interest-rate hikes are seen as raising the risk of recession, which is reviving the appeal of fixed-income securities.

“Global markets are clearly very nervous about aggressive Fed hikes, European gas shortages and fears Russian action on energy supplies could help lead to recession, and about the US earnings season,” said Andrew Ticehurst, a rates strategist at Nomura Holdings Inc. in Sydney. “We are seeing consistent signals from all asset classes, with equities weaker, credit spreads wider, yields lower, the Aussie dollar lower and the US currency higher.”

White-Knuckled Bond Investors Confident Only in More Havoc

While economists expect Wednesday’s key US inflation data to show consumer-price gains accelerated to a fresh 40-year high, bond investors have become more certain the Fed’s aggressive tightening will help bring prices under control. The 10-year breakeven rate has subsided to below 2.4%, after peaking above 3% in April.

Fed Bank of Atlanta President Raphael Bostic reiterated overnight his support for a 75-basis-point hike when the central bank meets later this month.  

Bostic Confident US Economy Can Handle Another Jumbo Rate Hike

A key gauge of expected price swings for US Treasuries pushed higher Monday as Treasuries rallied amid thin volumes. Last week it hit the highest since the March 2020 pandemic panic. 

“There’s no sign of a summer lull in volatility,” said Jack McIntyre, portfolio manager at Brandywine Global Investment Management. “We’re starved for information that gives us clarity on the growth, inflation dynamic,” and “we need more time to figure out how much inflation comes down.” 

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