Benchmark Australian 10-year government bond yields are plunging, falling to a fresh record low of 1.857% on Wednesday.
The chart below shows the amazing downward trend over the past two decades. It’s on a monthly time frame to show just how far it’s fallen.
This amazing move has been replicated globally over the same time period, with recent declines accelerating
Only this morning benchmark Japanese 10-year JGB yields hit a record-low level below -0.26%.
Yes, that’s a minus. Every Japanese bond out to 15-years is now trading with a negative yield, with those extending out to 30-years now threatening to do the same.
Mirroring that amazing stat, and perhaps even beating it, all Swiss government bonds now trade with negative yields. That means that investors are willing to lend to the Swiss government for half a century in order to receive less than they originally invested.
While not to the same degree, US 10-year treasuries also plumbed fresh all-time lows overnight, falling below 1.37%.
Safe haven assets are clearly in demand, something that is clearly at odds with riskier assets which, up until recently, had been pushing higher.
While ultra-easy monetary policy from major central banks continues to support government debt, perceived as a risk-free investment, the latest leg lower for yields stems from uncertainty over the outlook for the global economy, thanks in part to the UK Brexit vote.
Worries about Italy’s banking sector have also played a role.
“The Italian banking system is very shaky and there are noises coming out of Rome that this needs to be dealt with on Italy’s terms and not on the EU’s,” Joe Trevisani, chief market strategist at Worldwide Markets, told Reuters. “That’s serious business.”
While government bond yield curves have been augmented by various central bank policies globally, many still regard them as an indicator as to where an economy as heading.
On that score, things are looking pretty grim at present.
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