July 8, 2019 / 11:42 AM / 10 days ago

'The Incredible Disappearing Bond Yields'

LONDON (Reuters) - The past week has seen world bond markets reach new milestones, completing a collapse in borrowing costs for governments across the globe over the last 6 months.

The following graphics track the disappearance of yields and flattening of maturity curves across government bond markets this year:

1) EURO ZONE

After the nomination of Christine Lagarde to take over from Mario Draghi at the helm of the European Central Bank later this year, euro zone debt yields fell even further into negative yielding territory, as markets took the view that policy at the ECB will remain dovish. The yield on Germany’s 10-year Bund DE10YT=RR - the euro zone’s government debt benchmark - fell below the ECB’s overnight deposit rate aXZDEPF for the first time ever.

(GRAPHIC: Euro zone government debt falls further into negative yielding territory - tmsnrt.rs/2YFiJUF)

2) UNITED STATES

With the Federal Reserve pivoting towards a dovish policy stance since the start of the year, yields on U.S. Treasuries have steadily fallen across the bond market curve, with the 10-year Treasury yield US10YT=RR falling below the upper bound of the Fed’s interest rate band for the first time in 11 years. Only the 30-year Treasury bond US30YT=RR yields higher than the upper bound of the Fed’s interest rate as of early July.

(GRAPHIC: U.S. government debt yield curve - tmsnrt.rs/2YHFE1M)

3) UNITED KINGDOM

The UK’s gilts market also hit another milestone, with the yield on the 10-year gilt UK10YT=RR falling below the Bank of England’s policy rate GBBOEI=ECI for the first time in 11 years.

(GRAPHIC: UK government debt yield curve - tmsnrt.rs/2G0rm4R)

4) SWITZERLAND

A recent Reuters poll showed a majority of economists believe the Swiss National Bank will hold its ultra-loose monetary policy until at least 2021. That expectation, coupled with the SNB’s policy of keeping the Swiss franc from appreciating against the euro, has pushed all long-dated Swiss government bonds into negative-yielding territory except for the 50-year bond <0#CHBMK=>.

(GRAPHIC: Swiss government debt yield curve - tmsnrt.rs/2YOFAwY)

Reporting by Ritvik Carvalho; Editing by Toby Chopra

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