Gloomy outlook stokes drop in key bond yields

CONCERNS over the global recovery have hit benchmark government bond yields in many core Western economies in recent weeks.

Rising concerns over the Eurozone debt crisis have combined with surprisingly weak economic data in countries such as the UK and the US to knock investor confidence.

In the UK, 10-year notes dropped to 3.29 per cent at the close of business on Friday, down more than 13 per cent since early April.

Double-digit drops over the last eight weeks have also been recorded for US 10-year bonds, which closed at 3.07 per cent on Friday, and German 10-year bonds, which closed at 2.99 per cent.

In France 10-year notes closed at 3.34 per cent, over 11 per cent lower than their April peak.

A spike in American unemployment claims last week coincided with news that growth measured just 1.8 per cent annualised in the first quarter of the year, below the expectations of economists.

Slower growth, and the apparently impending end of the US Federal Reserve’s quantitative easing programme, have dampened inflation expectations in leading Western economies.