Government bond yields sink to record lows on double dip fears

The yields on the benchmark 10 year UK and German government bonds plumb new depths while Treasuries sink to 18 month low

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by James Phillipps on Aug 25, 2010 at 08:10

Government bond yields sink to record lows on double dip fears

Government bond yields in the UK, US and Germany hit record lows yesterday as investors ran for cover after more weak economic data.

Commodity prices also went into tailspin as fears about the slowing economic recovery gathered pace.

The markets look set to come under further pressure this week with durable goods orders, consumer confidence and the revised US second quarter GDP data all set to be released. Federal Reserve chairman Ben Bernanke is also set to address the markets about the Fed’s move to reinvest cash from maturing mortgage-backed securities on Friday.

The concerns about the economy were exacerbated yesterday by the revelation that purchases of previously owned homes unexpectedly sank by 27.2% in July to a 15 year low.

The FTSE sank by 1.51% on the news, while the Dow Jones fell 1.32% and the S&P 500 was down as much as 1.9% as investors took flight.

The wall of money piling into ‘safe haven’ government debt pushed the yield on benchmark 10 year German government bonds down to record lows of 2.15%, while gilt yields fell to 2.85% and Treasuries slumped to their lowest yield since the market nadir of March 2009 at 2.47%. Two year Treasury notes hit a record low of 0.46%. Euro investors were also hit by fresh concerns about Ireland after the country was downgraded to AA- by Standard & Poor’s and given a negative outlook.

The yen’s safe haven status was underlined as it rose to a 15 year high against the dollar as investors took flight from more risky currencies, such as the Australian dollar- hamstrung by hung parliament fears.

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5 comments so far. Why not have your say?

The safest place to put your money in this environment is Norway 4,000000 people and no debt. And the currency is backed with only two things that makes it strong oil and gas.

It’s safer than gold and never spoken about by the mass media but ask the rich and powerful where they park their millions,

Why do I know; ? because the banker on the next yacht is Norwegian and very very very rich, Paul Getty famously once said information is only as good as its source and this source is beyond reproach

Check it out for yourself it’s very interesting I assure you.

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'purchases of previously owned (US) homes unexpectedly sank by 27.2% in July to a 15 year low'

Why is this unexpected? The massive tax breaks given to first time buyers in the US have just been withdrawn, and guess what happens when you take a half-dead patient off life support......

The UK government are currently withdrawing the artificial support given to the housing market by the Labour government. I wonder what this means for UK house prices........?

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The article really does make it look like there is no hiding place from devaluation, even investing in goverment bonds is a sure way of losing money through inflation eating it away. But surely if there is inflation, which is expected, commodities futures must be the thing to invest in?

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The facts as reported, throw up some interesting questions.

Why do "investors" think that the Yen is a safe haven? The Japanese economy cannot free itself from recession as it is, and any strenthening of the currency will exacerbate the situation.

When all influences conspire towards recession it is logical to assume that the only safe haven will be gold. This line of thought has to some extent been borne out by recent rises in bullion. However what is puzzling is that gold miners have not risen in tandem and most of the price fluctuations seem to occur on the Nymex, and not the LME.

I have been reading critical analysis of the bullion market. The forensic evidence which charts provide suggest that the market is deliberately rigged. I am keeping an open mind on that one, but the market certainly looks perverse at the moment.

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Franco

Aug 25, 2010 at 15:44

Invest in Swiss francs dudes! They sell to the rich and in this best of all possile worlds, wealth is getting concentrated into fewer and fewer hands.

But the poor need not worry, the rich will always need servants and cannon fodder for their defence.

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