For the first time on record the yield on benchmark Australian 10-year government bonds has fallen below 2%, touching a low of 1.998% in early Asian trade on Thursday.
The strength in Australian government debt mirrors that seen other sovereign debt markets with yields on Japanese government bonds (JGBs) with durations of between 5 to 30 years all hitting all time record lows ahead of the Bank of Japan’s June policy decision, a meeting where the bank left monetary policy settings unchanged.
The moves in Japanese and Australian bond yields followed similarly aggressive moves in German bunds and UK gilts as investors rush to safe haven assets before Britain goes to the polls next week to decide whether it will remain a member of the European Union.
“Brexit” risk, as it now known commonly across financial markets, is also impacting currency markets on Thursday with the Japanese yen, seen as a safe haven by investors, rising sharply against the US dollar.
The USDJPY is currently trading at 104.61, down 1.31% for the session. It is currently trading at the lowest level seen since October 2014.
The strength in the yen has seen risk assets, including the Australian dollar, reverse early session gains. AUD/USD currently trades at .7389, having been as high as .7434 just before the release of Australian employment data for May.