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The name's bonds: buyers pile in amid risks

Friday, June 10, 2016 - 01:30

European shares hit a two-week slump and a Brexit-fuelled bond rally helps push German and UK yields down to record lows. But, as Kirsty Basset reports, the UK's EU referendum is not the only thing worrying traders.

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Bond yields have been marching steadily down this week, as investors fret over global risks. The benchmark for borrowing costs across the euro zone - German Bund yields - have fallen to as low as 0.021 per cent, with a move to zero or below in sight. If Bunds fell into negative territory, investors would effectively be paying to lend money to the German government. (SOUNDBITE)(English) OANDA MARKET ANALYST CRAIG ERLAM SAYING: "These are very strange times for European bond markets right now and I do worry that what we are effectively doing at the moment is sowing the seeds for future crises." According to Fitch Ratings agency, just over $10 trillion of sovereign bonds globally had negative yields in May. That's worrying Janus Capital's Bill Gross, who believes the pile will one day "explode." Others agree. (SOUNDBITE)(English) OANDA MARKET ANALYST CRAIG ERLAM SAYING: "We've got very low yields in countries that don't necessarily warrant them so potentially we've got this bubble forming that could lead to another crisis down the line." Investors are piling into safehaven assets like bonds as a number of global risks loom large. Slowing growth in emerging markets, particularly China. Weakened U.S. rate hike expectations folllowing dismal jobs numbers a week ago. But the biggest risk for investors in coming weeks - concerns over the June 23 EU referendum - and whether or not Britain will decide to stay in the EU.

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The name's bonds: buyers pile in amid risks

Friday, June 10, 2016 - 01:30