(Bloomberg) -- The latest escalation in the U.S.-China trade war has sent investors rushing once more to haven assets, pushing the world’s stockpile of negative-yielding bonds to another record.
The market of the Bloomberg Barclays Global Negative Yielding Debt Index closed at $15.01 trillion Monday, as China retaliated against U.S. tariffs by allowing the yuan to fall and announcing it would cease purchases of American farm goods. The demand for havens looked set to continue Tuesday after the Trump administration formally labeled China a currency manipulator.
Global bonds surged on the escalation as investors sought the safety of government debt. Benchmark Treasury yields dropped to the lowest since before President Donald Trump’s election and 30-year bund equivalents closed below zero, bringing the entire German yield curve into negative territory.
Investors are starting to grasp the potential for a protracted trade conflict and with it central bank interest-rate cuts to offset the economic impact, further putting pressure on bond yields. Traders brought forward when they think the Federal Reserve will complete a half-point of cuts, now forecasting that will happen by the end of October, versus January two days ago. They see 100 basis points of cuts over the next 12 months.
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