- Italian banking woes, Brexit uncertainty boosts market jitters
- Germany’s benchmark bund yield drops to record low on Tuesday
Europe’s safest bonds surged, sending German 10-year yields to a record-low and those on similar-maturity French and Dutch securities closer to zero.
Demand for fixed-income assets has been boosted as Italy considers injecting fresh capital into Banca Monte dei Paschi di Siena SpA to boost its finances before stress-test results and as the repercussions of the U.K. voting to leave the European Union spread. The surge in bonds has also pushed U.S. 10-year yields to an all-time low, while almost $10 trillion of securities in the Bloomberg Global Developed Sovereign Bond Index now have negative yields.
“It is sort of a perfect storm,” said Martin van Vliet, senior interest-rate strategist at ING Groep NV in Amsterdam. “We have rather concerning news about the problems faced by the Italian banking system and we have obviously the flare up in Brexit concerns and we have quite thin markets. Personally I think we could go even lower in coming days.”
German 10-year bund yield fell four basis points, or 0.04 percentage point, to minus 0.18 percent as of 4:34 p.m. London time. It earlier touched a record minus 0.182 percent. The 0.5 percent security due in February 2026 rose 0.39, or 3.90 euros per 1,000-euro ($1,110) face amount, to 106.595.
The yield on similar-maturity Dutch bonds dropped to a record 0.026 percent. French 10-year yields fell to as low as 0.131 percent, while those on the nation’s nine-year debt fell below zero for the first time.