Record bond yields decline points to investors’ fears

Government bond yields in most major economies worldwide have been flirting with all-time lows in the last few days, indicating that investors are wary of an impending recession. German and French 10-year bond yields hit record lows this week, both falling into sub-zero territory after comments from European Central Bank (ECB) official and Dutch central bank chief Klaas Knot buoyed expectations for monetary policy easing, with the aim of boosting inflation in the euro zone. Yields were then pushed down further by bets that potential ECB chief Christine Lagarde will maintain a dovish stance to buoy the euro zone economy.

Bond yields move inversely to their prices. On Thursday, the yield on the 10-year German bund, an important benchmark for European fixed income assets and viewed as a safe haven for investors, was down at -0.398%. Meanwhile, French 10-year bond yields had fallen to -0.12%, Belgian 10-year yields plunged below zero for the first time ever, and Italian 10-year bond yields dropped to a 14-month low of 1.67%.

In times of uncertainty and challenging market environment, investors tend to move their investments from perceived riskier assets into safe havens like gold and government bonds. The move highlights ongoing uncertainty for the euro zone’s economy fueled by a slowdown in Germany, growing unease around Brexit and global trade tensions.