BERLIN – The yield on Germany’s 10-year government bond fell below zero for the first time on Tuesday, a symbolic milestone that highlights the huge influence on markets of central bank stimulus policies as well as investors’ growing concerns about the global economy.
The yield on the bond, a traditional safe haven for investors, fell as low as minus 0.032 per cent early Tuesday, according to financial information provider FactSet. The yield drop as the bond’s price rises.
The German 10-year yield had come close to zero recently but never before dipped into negative territory.
Government bond yields indicate the rate at which the government would be able to borrow. A negative right indicates investors would be willing to pay the German government to lend it money.
Bonds have been in demand for a number of reasons.
Above all, the European Central Bank’s ultra-loose monetary policy has seen it cut its key interest rate to zero and buy hundreds of billions of bonds as part of its stimulus programs. Low rates in theory should encourage people to borrow and invest more.
Diminishing expectations of an interest rate hike by the U.S. Federal Reserve have also contributed to the trend, as have concerns over a possible British exit from the European Union and the health of the global economy.
Investors often turn to top-rated government bonds, such as those of the U.S. and Germany, when concerned about the stability of markets.