Yields on the 10-year government debt of Germany dipped below zero on Tuesday for the first time on record, in a dramatic sign of the outsize effect of central-bank policy and investors’ search for safe havens.
That search for safety accelerated on Tuesday as concerns that Britain could vote to leave the European Union next week continued to rattle global markets, pushing yields down on a range of government debt from Japan to the U.K.
The yield on the bund fell to minus 0.03% when European markets opened, from around 0.02% at Monday’s close, according to data from Tradeweb. With political risks around the world mounting, investors see room for yields to fall even further.
Government-bond yields have been falling for the past year across the developed world as investors look for safety and central banks push interest rates close to zero and into negative territory. The European Central Bank has contributed to the fall in bund yields through its massive bond-buying program, aimed at lowering financing costs across the eurozone.
More recently, the U.K. referendum has added to the flight to safety as opinion polls increasingly point to a so-called Brexit on June 23, spurring worries about a stretch of uncertainty that could hurt the global economy.
“The fact that Brexit is now perceived as a possibility is a total game-changer, and it’s very difficult to estimate the macroeconomic impact,” said Franck Dixmier, global head of fixed income at Allianz Global Investors.
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