Bond yields dip to record lows

Global investors continue to pile into safe havens, as expectations grow for more central banker stimulus.

Government bond yields fell to record lows on Tuesday as investors continued to pile into haven assets and bet on central bank action in the aftermath of Britain’s vote to leave the European Union.

The bid yield on the US 10-year Treasury note dipped as low as 1.380 per cent in European morning trade as prices rose, according to Tradeweb. That surpassed the previous intraday low of 1.385 per cent set on Friday.

The move came as investors turned cautious and sold down stocks, with futures markets pointing to a 0.6 per cent opening loss for the S&P 500 on Tuesday.

Investors have been grappling with mixed signals from financial markets since Britain’s June 23 referendum.

After a sharp initial selloff, stocks bounced back last week as fears of Brexit’s impact on the global economy appeared to recede and investors bet that central banks will step in.

But government bond yields continue to hit new depths, suggesting investors are knuckling down for a sustained period of low growth and potential central bank stimulus.

The global stock of negative-yielding debt jumped by almost $1 billion to nearly $11 trillion in the aftermath of the Brexit vote, according to a report from Bank of America Merrill Lynch strategists published last week.

The yield on Switzerland government bonds maturing in 2064 have been dipping in and out of negative territory since last Thursday, leaving no Swiss government securities with a positive yield. German government bonds out to 2030 have negative yields. In Japan, the yield on 20-year government debt is hovering just above zero. Meanwhile, in the UK the yield on the 10-year gilt fell to 0.79 per cent Tuesday, on course for its lowest ever close. The yield on some short-dated gilts briefly turned negative last week, as expectations mounted for the Bank of England to cut interest rates.

Many now expect the Bank of Japan to ease monetary policy further at its July meeting and the European Central Bank to extend its bond-buying program later this year.

- Dow Jones newswires