BERLIN–The yield on the 10-year government bund offered by Germany, Europe’s largest economy and the continent’s benchmark security, fell below zero for the first time on record.
According to Bloomberg, Germany has now joined Japan and Switzerland in having 10-year bond yields of less than zero. The plunge in yields has been driven by European Central Bank’s policy of negative interest rates and asset purchases, Bloomberg reported.
Benchmark German 10-year bund yields fell three basis points, or 0.03 percentage point, to minus 0.003% at 4:23 p.m. London time, having touched minus 0.033%, the lowest since Bloomberg began collecting the data in 1989. The 0.5% security due February 2026 rose 0.26, or 2.60 euros per 1,000-euro ($1,120) face amount, to 104.86.
Bloomberg noted bonds have been rallying around the world, with yields on 10-year U.K., Swiss and Japanese bonds also falling to records, as investors seek shelter before Britain votes on whether to exit the world’s largest trading bloc after a referendum next week.
While the collapse in yields is good news for governments that are reaping lower borrowing costs and in some cases command a fee to hold investors’ money, it’s a sign that even after pouring in record amounts of stimulus, central banks are still struggling in their efforts to boost growth and inflation, Bloomberg reported.