Brexit fears drive German bond yields to below zero

14th June 2016, Comments 0 comments

Fears of a possible Brexit and economic concerns pushed yields on Germany's sovereign debt into negative territory for the first time on Tuesday, meaning investors are willing to actually pay to hold German government debt rather than receive any return.

Low yields mean high prices and among the factors driving the current rally in the price of the so-called 10-year Bund are concerns about the global economy, rock-bottom inflation expectations in the single currency area and fears about a possible "Brexit" with the British referendum on EU membership just 10 days away, traders said.

Interest rates on sovereign debt have been low for some time as central banks snap up government bonds from investors in an effort to boost economic growth through increased liquidity in a policy known as quantitative easing or QE.

But be it in Japan, the United States, Switzerland or Britain, the rate of return for sovereign bonds of most major industrialised nations are striking new record lows on a daily basis on the the secondary market were investors trade debt after it is first issued.

Analysts say the ongoing downward push, which has now taken the Bund yield into negative territory, is the result of a renewed bout of jitters about the global economy.


© 2016 AFP

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