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Eurozone bond yields near record lows

August 14, 2019

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LONDON: Eurozone government bond yields fell on Tuesday, with Germany’s 10-year benchmark reaching new lows, as concerns ranging from Brexit to political turmoil in Italy drover investors into safe-haven assets.

A survey of business sentiment in Germany added to a dismal image of eurozone’s largest economy, showing a deterioration in the outlook for the German economy.

ZEW said its monthly survey showed economic sentiment among investors fell to -44.1 from -24.5 in July. Economists polled by Reuters had expected a drop to -28.5.

A separate gauge measuring investors’ assessment of current economic conditions fell to -13.5 from -1.1 in the previous month. Analysts had predicted a reading of -7.0.

“The ZEW index hasn’t been the most important, but this time everyone is very nervous and looking at all kinds of data,” said Daniel Lenz, rates strategist at DZ Bank.

Ten-year German government bond yields were last at -0.613 per cent in early trade, having hit a record low of 0.619pc earlier in the session. Its 30-year notes outperformed and were down four basis points at -0.135pc, near record lows,.

Economic woes and expectations of more monetary easing are pushing down bond yields globally. Japanese 10-year yields hit three-year lows.

There are now nine sovereigns with 10-year bonds that trade at market prices implying a negative yield to maturity. The nominal stock of government debt with negative yields is about $15 trillion, Fitch said in a note on Monday.

Italian yields were down as much as seven basis points across the curve, falling for the second straight trading day after a call on Friday from League leader Matteo Salvini to dissolve the government.

Published in Dawn, August 14th, 2019