German Bonds Surge to Take Benchmark Yields to Record Lows

(Bloomberg) -- German bonds rallied to push long-term yields to all-time lows as investors flock to havens from the growing economic impact of the coronavirus.

The yields on 10-year and 30-year bonds fell below previous records reached last year. The moves are part of a global rush to position for stimulus measures by the world’s major central banks given the risk of recession.

The drop came on a day where other haven debt also smashed records, with yields on U.S. Treasuries plumbing unseen levels. Investors are expecting more action from policy makers after the Federal Reserve’s emergency interest-rate cut on Tuesday, with the European Central Bank meeting next week.

“These dynamics don’t come round often -- we’re reminded of 2008 and the euro crisis in 2011,” said Kiran Ganesh, a multi-asset strategist at UBS Global Wealth Management. “It’s the market struggling to weigh up the virus and what containment measures can be put in place.”

Yields on 10-year bunds, seen as the benchmark safe asset in Europe, fell as much as six basis points to -0.747%, while those on 30-year notes touched -0.337%. The entire German curve is below 0%, meaning that investors who hold the securities to maturity are willing to pay for the privilege.

The move in Germany has still been outstripped by the U.S., with the spread between the two narrowing to the tightest since 2016 as U.S. 10-year yields fell 17 basis points to 0.74%. The decline spurred talk of short term U.S. rates even turning negative, which would see them joining a $14 trillion global stockpile of sub-zero bonds.

“The flight to quality continues to benefit safe assets and it is hard to see where this stops unless the epidemic get contained,” said Antoine Bouvet, senior rates strategist at ING Groep NV. “We’re still bullish.”

To contact the reporters on this story: John Ainger in London at jainger@bloomberg.net;Michael Hunter in London at mhunter72@bloomberg.net

To contact the editors responsible for this story: Dana El Baltaji at delbaltaji@bloomberg.net, Neil Chatterjee, Anooja Debnath

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