The flow of money into safe haven trades continues in early European trade with German 10-year Bunds tumbling to a new all-time low of -0.17% in the wake of Britain’s vote to leave the EU.
That move was a big fall from the previous night’s close of +0.096% when markets were expecting Britain to remain in the EU and a substantially lower level than the previous low of -0.038% the 10-year bund hit when the British referendum’s Leave camp was in the ascendancy in mid-June.
The answer to the obvious question of why someone would want to buy a bond with a negative yield is that in times of trouble traders, investors, and mums and dads all over the globe don’t worry about the return on their money. Rather they are worried about the return of their money.
So on a day when the European stock markets are down 8, 9, or even 10 per cent, on the day, paying the German government 0.17 per cent per annum to place funds in one of the safest places in the investible universe is small change.
That’s why the bonds of other AAA rated nations are also rallying hard today.
The Australian government 10 year bond had it’s lowest close of all-time at 1.98% while the 10 US Treasury is currently expected to open at 1.47% off the low of 1.4060% in the past hour or so.
A short time ago the 10-year Bund was trading at -0.13%.
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