Risk aversion drags down bond yields as investors flock to safe havens

June 10, 2016

Article by ForexTime

Expectations that the Fed is less likely to push up interest rates this summer following a weaker-than-expected jobs report last Friday also have pressured U.S. bond yields. Yields fall when prices rise.

On Thursday, the 10-year Treasury yield fell to 1.678%, its lowest settlement since its 2016 trough of 1.642% in February.

Low yields also have made returns look more attractive in the stock market, where a weakening dollar and rising oil prices have helped boost shares.

The Dow Jones Industrial Average fell 19.86 points, or 0.1%, to 17985.19 Thursday but was still up 15% from its 2016 low and near its all-time high of 18312.39. The S&P 500 also slipped Thursday, by 3.64, or 0.2%, to 2115.48, but was just 0.7% below its record.

Recently, Treasury yields have been predominantly dragged down by the drop in government-bond yields around the globe, rather than by demand for haven assets spurred by concerns about the economy.


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Meanwhile, yields in Germany, the U.K. and Switzerland hit record lows this week, with the 10-year German bund touching 0.025% Thursday. Eurozone bond yields dropped sharply amid weak economic growth, low inflation and bond purchases by the European Central Bank.

 


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