Global Bond Rally Sends Asia Yields to Record Lows on Stock Rout

  • Japan 10-year yield falls to 0.19%; China's declines to 2.70%
  • Flight to quality is `escalating,' Nikko Asset's Bridges says

Bond yields fell to record lows in Japan, China, South Korea and Taiwan as a stock rout fueled a global debt-market rally.

The yield on the Bloomberg Global Developed Sovereign Bond Index dropped to 0.93 percent Wednesday, the least since April. Securities in the gauge have returned 1 percent in 2016. The MSCI All Country World Index of shares fell 0.4 percent Thursday, leaving it down 7.5 percent this year.

“Money is going into safety boxes now,” said Kazuaki Oh’E, the head of fixed income at CIBC World Markets Japan Inc. in Tokyo. “There’s a flight to quality.”

Japan’s 10-year yield dropped as low as 0.19 percent, passing the record set almost a year ago. It was 0.23 percent as of 3:08 p.m. Tokyo time, according to Japan Bond Trading Co., the nation’s largest inter-dealer debt broker.

China’s slid as far as 2.70 percent, the least for a benchmark 10-year note in ChinaBond data going back to September 2007, and was at 2.76 percent. In South Korea, yield declined to an all-time low of 1.99 percent, before climbing to 2.03 percent. Taiwan’s yield held at a record 0.97 percent.

‘Just Escalating’

The benchmark 10-year U.S. note yield declined one basis point to 2.08 percent, based on Bloomberg Bond Trader data. The price of the 2.25 percent note due in November 2025 climbed 2/32, or 63 cents per $1,000 face amount, to 101 15/32.

When China unexpectedly sent its currency lower last week, the move sparked concern officials in the nation felt compelled to resort to emergency measures to spur the economy. Investors dumped stocks and snapped up bonds as a result.

The Standard & Poor’s 500 Index slid 2.5 percent Wednesday to its lowest closing level since Sept. 29.

“It’s just escalating,” said Roger Bridges, the chief global strategist for interest rates and currencies in Sydney at Nikko Asset Management Australia.

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