By FXEmpire.com
The ongoing global uncertainty and particularly the Euro zone crisis seems to have created a global rush for safer assets and hence have helped the 10 year yields on US, German and Japan government bonds to uncharted lows.
Yields on bonds issued by countries still seen as safe have collapsed in recent days as the European crisis entered a new phase centering on Spain.
Yields on 10-year German bonds, known as bunds, tumbled to a record low of 1.2% on Thursday, while U.S. bondyields on 10-year notes fell to 1.56% a 6 decade low and the Japanese government 10-year bond yield fell to a 9-year low of 0.81%.The primary reason for such a drastic fall in treasury yields have been due to mounting anxiety over Euro debt crisis. On the backdrop of such volatile global environment, investors are more concerned about principle and the return and hence have embraced low yields and returned to a safer asset class.
The resolution to the global uncertainty and euro zone crisis seems to be very distant at this stage hence the global rush to safe haven assets is likely to continue and under such scenario the bond yields of the above nations would continue to plunge further.
On Friday US Treasuries rallied, pushing 10- and 30-year yields to all-time lows, after the economy added fewer jobs in May than economists forecast, and concern festered that the European sovereign-debt crisis may spread.
U.S. 10-year note yields dropped below 1.5 percent for the first time, posting the biggest weekly drop in eight months, after the Labor Department reported U.S. employment growth was the least in a year. Morgan Stanley said the probability of more central bank policy stimulus reached 80 percent as Federal Reserve Chairman Bernanke prepared to testify before Congress on June 7 about the outlook for the U.S. economy.
Germany’s two-year bond yield turned negative for the first time, and Berlin’s 30-year borrowing costs fell below those of Japan, as investors sought shelter in Europe’s safest assets over concern that policy makers were unable or unwilling to stem the region’s debt crisis.
The 10-year benchmark bond yields of the UK and the Netherlands fell below 1.5 per cent, and Denmark’s comparable bond yield fell under 1 per cent, even as the eurozone periphery bond yields edged up again, underscoring the “flight to safety”.
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Originally posted here
