German Bond Yields Slide to Records as Dovish Fed Meets Brexit

  • Yields on German securities out to 10 years set all-time lows
  • Peripheral debt leads moves with Spanish yield at month-high

German debt yields up to 10 years dropped to records as central-bank meetings in Japan and the U.S. left investors anticipating a world where interest rates will be kept lower for longer.

The U.K.’s referendum on membership of the European Union is adding to the clamor for havens, and was singled out by Federal Reserve Chair Janet Yellen as among the reasons she stood pat on policy on Wednesday.

But the Fed chief went further than the risks of a potential Brexit, saying that some of the forces holding down interest rates may be long-lasting. Less than 12 hours later, the Bank of Japan refrained from expanding stimulus --- and cited Britain’s vote as a reason its nation’s bond yields also slid to records.

The declines in yields are “mostly spill-overs from post-Fed U.S. moves,” said Jan von Gerich, a chief strategist at Nordea Bank AB in Helsinki. “The Fed was dovish especially longer out, which was a bit surprising. Additionally, you still have Brexit worries and another weakening in risk appetite.”

Concern the U.K. will quit the world’s largest single market have infected global markets this week as a series of polls show the “Leave” campaign is maintaining its lead in the run-up to the June 23 vote. The biggest euro-zone movers on Thursday were securities from so-called peripheral nations as investors fled riskier assets -- and as Spain sold about 5 billion euros ($5.6 billion) of bonds.

Benchmark German 10-year bund yields dropped one basis point, or 0.01 percentage point, to minus 0.02 percent as of 4:33 p.m. London time, after tumbling to an all-time low of minus 0.038 percent. They fell below zero for the first time ever on Tuesday. The 0.5 percent bond due in February 2026 rose 0.1, or 1 euro per 1,000-euro face amount, to 105.035.

Yields on two-year German notes touched minus 0.609 percent, while German 30-year yields fell to as low as 0.48 percent, the lowest since April 2015. The yield on Spain’s 10-year security rose four basis points to 1.61 percent, after earlier reaching a one-month high of 1.63 percent.

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