(Reuters) - Borrowing costs on U.S. fixed-rate mortgages fell to their lowest level since November 2016 in step with a dramatic drop in bond yields due to trade and economic worries, Freddie Mac said on Thursday.

Fears about a global downturn, stoked by trade tensions between China and the United States, had set off a rush out of stocks and into low-risk U.S. government bonds since last week before that move subsided on Thursday.

“Business sentiment is declining on negative trade and manufacturing headlines, but consumer sentiment remains buoyed by a strong labor market and low rates that will continue to drive home sales into the fall,” Freddie Mac’s chief economist Sam Khater said in a statement.

On Wednesday, the yields on benchmark 10-year Treasury notes fell to 1.595%, their lowest level since October 2016, while the yields on the 30-year bond declined to 2.213%, which was within striking distance of their all-time low of 2.089% set in July 2016.

The interest rates on 30-year mortgages averaged 3.60% in the week ended Aug. 8, down from 3.75% the week before and 4.59% a year earlier, the mortgage finance agency said.

The average 15-year mortgage rate fell to 3.05% in the latest week, down from 3.20% a week ago. It was 4.05% a year earlier.

Interest rates on five-year adjustable-rate home loans averaged 3.36%, the lowest since December 2017.

(GRAPHIC - U.S. Treasury yields vs mortgage rates: tmsnrt.rs/2CHFnQI)