Germany issues 10-year bond at negative interest rate for first time

Government-bond auctions across the world have been in focus this week, as investors are adjusting their bond portfolios to account for unprecedented low yields and dovish central banks in Japan and the United Kingdom. Even so, the sale shows that as market conditions deteriorate amid concerns over the health of Italy’s banking sector and Britain’s vote to leave the European Union, some investors are choosing the safety of higher-rated sovereign debt over returns.

NEW YORK, July 13 Don’t count out the U.S. Treasury market.

Van Zwol concludes that there has to be a limit to how negative yields can go but we may not be there yet. Bond yields and prices move in opposite directions.

In a rush to take advantage of the uncertainty caused by the Brexit decision many countries in Europe chose to introduce low yield debt offerings on Wednesday. “Global growth remains slow and inflation remains low”, he said, adding that predications by market pundits about higher yields over the past few years have failed to pan out.

The 30-year Treasury bonds were sold at a yield of 2.172%, smashing the previous low of 2.43% set in January 2015.

The indirect bidding, a proxy of demand from foreign investors, jumped to 68.5%.

Eurozone countries, including Germany, have sold shorter-dated bonds at a negative yield before and both Switzerland and Japan have issued 10-year bonds at below zero.

A negative yield would mean investors buying the 10-year bund and holding it to maturity would receive less back than they paid at the outset.

In the latest German 10-year bund auction, the yield came in at -0.05% compared with the 0.01% previously and this was the first time on record that Germany auctioned 10-year paper with a negative yield even though overall global risk appetite has improved. The rate on the fifteen-year bond rose to 17.501 percent from 16.934 percent at the last auction on April 20.

A slump in oil prices and a pause in stocks recent streak of record-setting gains, supported buying in government bonds. The so-called taper tantrum spread to bond markets globally.