German, Japanese, and British bond yields are plumbing historic depths as low growth outlooks combined with event risk concerns (Brexit, elections, etc.) have sent investors scurrying for safe-havens (away from US Biotechs).
At 2.0bps, 10Y Bunds are inching ever closer to the Maginot Line of NIRP which JGBs have already crossed, and all of this global compression is dragging US Treasury yields to their lowest levels since February’s flash-crash… back below 10Y’s lowest close level since 2013.
As Bloomberg reports, the rush into government bonds during 2016 shows no sign of reversing as a weakening global economic outlook fuels demand for perceived havens.
Bonds are off to their best start to a year since at least 1997, according to a broad global gauge of investment-grade debt that has gained 4.6 percent since the end of December, based on Bank of America Corp. data. They rallied most recently after the weakest U.S. payrolls data in almost six years was reported June 3, damping expectations the Federal Reserve will raise interest rates in the next few months.
At the same time, polls indicate Britain’s vote on remaining or exiting the European Union is too close to call. Billionaire investor George Soros was said to be concerned large market shifts may be at hand.
“The environment is fundamentally supportive of these low yields, and there is nothing in sight, at least in the short term, that could trigger a trend reversal,” said Marius Daheim, a senior rates strategist at SEB AB in Frankfurt. “The labor market report was one thing which has driven the Treasury market and has supported other markets. If you look in the euro zone, you have Brexit risks that have risen recently, and that is also creating safe-haven flows.”
10Y Japanese Government bonds plunged to record lows at -15bps!
With Gilts down 9 days in a row…
The World Bank this week cut its outlook for global growth as business spending sags in advanced economies including the U.S., while commodity exporters in emerging markets struggle to adjust to low prices.
The yield on the Bloomberg Global Developed Sovereign Bond Index dropped to a record 0.601 percent Thursday.
And stocks are waking up to that reality…