The Fed chief acknowledged the central bank doesn’t have all the answers, adding that it would take a multi-faceted response from governments, health-care professionals, central bankers and others to stem the human and economic damage from the virus.

“Powell didn’t sound very upbeat, and is part of what is spooking markets,” said Roberto Perli, a partner at Cornerstone Macro LLC and former Fed economist. “The driver of yields is also what the market expects the Fed to do, and they keep pulling expectations for the funds rate further down.”

Yields on two-year Treasuries dropped as much as 28.1 basis points to 0.6223% on Tuesday -- still well above the record low of 0.14% set in 2011.

The Fed move followed public pressure for a cut by President Donald Trump, whose stewardship of the economy is central to his re-election campaign this year. After Tuesday’s cut, Trump called for more, tweeting that the Fed “must further ease and, most importantly, come into line with other countries/competitors. We are not playing on a level field. Not fair to USA.”

Treasury yields slid as the pile of negative-yielding debt around the world continued to grow amid a worsening economic backdrop and mounting fears of a pandemic. And the list of strategists and investors warning that U.S. government debt could join those abroad yielding less than zero is growing.

JPMorgan Chase & Co.’s Jan Loeys said the U.S. is trapped in a scenario that will pull Treasury yields down toward zero or even below as soon as this year.

“The more you move with rate cuts, the faster you go down into the quicksand,” Loeys said. “The more medium-term issue is that the Fed is running out of ammunition and is spending it now. We see a 50-50 chance that we are at zero interest rates at the end of year -- and then that’s it.”

--With assistance from Edward Bolingbroke and Elizabeth Stanton.

This article was provided by Bloomberg News.

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