The German government sold 10-year bonds with a negative yield for the first time since 2016 today, as sovereign debt rallies amid global economic gloom.
The German Finance Agency said the government sold €2.4bn (£2bn) of “bunds” with 10-year maturities with an average yield of minus 0.05 per cent. In practice this means that investors paid more for the bonds than they will receive if they hold them until they mature.
There was 2.6 times more demand for the 10-year debt than the German government accepted.
Government bonds have started to look like attractive safe assets to hold as central banks and economic forecasters issue warnings over the health of the global economy.
Gloomy economic data and low interest rates have seen highly-rated government bond yields – the return an investor gets from buying a government’s debt – fall in recent days.
Yields on German bunds fell to minus 0.06 per cent this morning, their lowest rate in over two years, after Mario Draghi said today the European Central Bank (ECB) was ready to halt planned rates rises as the Eurozone continues to struggle.
Last week, the US Federal Reserve said it will hold interest rates longer than expected amid mixed economic signals.
On Friday, long-term US government debt yields fell below short-term rates, marking an inversion of the so-called yield curve. The last yield curve inversion was in 2007, and has commonly been seen as a sign of impending recession, as investors think it riskier to invest short term than long term.