German Bund yield crashes below zero for first time since 2016 on bleak data
* German Bund yield falls to a low of -0.033 pct
* German, euro zone, U.S. PMIs disappoint
* U.S. bond yield curve inverts for first time since 2007
* Other euro zone bond yields slide
* Euro zone periphery govt bond yields: http://tmsnrt.rs/2ii2Bqr
(Updates prices to close)
By Virginia Furness and Dhara Ranasinghe
LONDON, March 22 (Reuters) - Germany's 10-year bond yield
dived below zero percent on Friday for the first time since
October 2016, as a survey showing German manufacturing
contracted for a third straight month fuelled fears about a
widespread European slowdown.
Those concerns were exacerbated when the U.S. manufacturing
sector flash Purchasing Managers' Index (PMI) came in below
estimates, triggering an inversion of the U.S. bond yield curve
for the first time since 2007.
In a session of eye-popping moves across major bond markets,
Germany's 10-year bond yield slid over 6 basis points to minus
0.033 percent, its lowest since October 2016.
French and Dutch long-dated bond yields hit their lowest
since 2016 , British gilt yields fell to
their lowest since September 2017 and the 10-year
U.S. Treasury yields slid 10 bps to 14-month lows.
"We had tentative signs of a stabilisation in the economic
numbers and then the data came out today and it suggested there
is no stabilisation," said Peter Schaffrik, global macro
strategist at RBC Capital Markets in London.
IHS Markit's flash composite Purchasing Managers' Index
measuring activity in German services and manufacturing, which
together account for more than two-thirds of the economy, fell
to 51.5 in March, its lowest reading since June 2013.
The broader euro zone PMI meanwhile showed that businesses
across the 19-country currency bloc have performed much worse
than expected this month.
"The narrative behind it isn't a big surprise ... But the
size of the surprise is fairly material. These things happen
very rarely, and the surprise is what matters the most for
market activity," said Antoine Bouvet, rates strategist at
The bleak data comes as the U.S. Federal Reserve this week
abandoned its projections for a rate hike this year and Brexit
uncertainty has grown, bolstering demand for safe-haven assets.
The ripple effects were felt across markets.
The euro fell 0.8 percent to below $1.13, while
Europe's STOXX 600 index tumbled 1.3 percent. Italian
bond yields rose as a "risk-off" mood gripped
investors. On Wall Street, U.S. stocks sank 1.5 to 2 percent
In a worrying sign for the European Central Bank, its
favoured market gauge of long-term inflation expectations fell
to 1.4105 -- down almost 7 bps from Thursday's closing levels to
its lowest since 2016.
Concern about growing recession risks was highlighted by the
move in the U.S. bond yield curve. The gap between three-month
Treasury bills and 10-year note yields
inverted on Friday for the first time since 2007.
In France and Germany, 30-year bond yields slid almost 10
bps each as investors moved up the government bond curve in the
hope of getting some yield . They were
set for their biggest daily falls since 2016.
Germany's 10-year yield last hit zero percent in October,
2016, when ECB chief Mario Draghi dispelled market concerns
about tapering and said the ECB remained committed to its
now-ended asset purchase programme. Bund yields below zero
percent show investors are willing to pay the German government
to hold its long-term debt, seen among the safest of assets.
"We think Bund yields can now certainly revisit the minus
0.15 percent area which refocuses investor concerns about the
growth trajectory," said Rabbani Wahhab, senior fixed income
fund manager at London and Capital.
(Reporting by Virginia Furness and Dhara Ranasinghe; Editing by
First Published: 2019-03-22 10:24:39
Updated 2019-03-22 18:46:19
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