Investors surge to safe UK and German bonds
THE BRITISH government’s borrowing costs fell to an all-time low yesterday as investors desperately sought safe locations to keep their cash as the Eurozone crisis deepens further.
Yields on German bunds, US Treasuries, and Japanese government bonds also dropped, while the euro fell against the dollar, pound and yen.
Meanwhile investors continued to flee weaker Eurozone countries as worries grow over Greece’s future in the currency union, France’s commitment to fiscal discipline and Spain’s ability to pay its debts.
Yields on 10-year UK gilts fell 0.33 percentage points yesterday to end at 1.904, though during the course of the day yields dropped to an all-time low of 1.881 per cent.
The government took advantage of the ultra-low borrowing costs, auctioning £2bn in 30-year bonds at interest rates of just 3.224 per cent.
“Demand for perceived safe assets is exceptionally strong here,” said Sam Hill from RBC Capital Markets.
“For the time being the effect of an end to quantitative easing is comfortably being trumped by investors setting their objective as the return of their capital, rather than worrying about the rate of return on that investment.”
Germany saw yields on 10-year debt fall 0.025 percentage points to 1.52 per cent, and the government sold €4.032bn (£3.24bn) of five-year bunds at a yield of 0.56 per cent – also a record low.
US 10-year borrowing costs fell 0.019 percentage points to 1.82 per cent, and Japan’s dropped 0.018 points to 0.854 per cent.
Meanwhile Italy’s 10-year borrowing costs jumped 0.143 percentage points to 5.597 per cent, Spain’s rose 0.235 points to a 6.078 per cent, its highest since November, and France’s increased 0.044 percentage points to 2.857 per cent.
The euro fell 0.29 per cent against the pound yesterday, 0.73 per cent against the yen and 0.0061 per cent agains the dollar.