Low interest rates across Europe have sent government bond yields to historically low levels, with French, Spanish, Italian and Dutch government borrowing costs at rates last seen more than 100 years ago, reports the
The business daily said that the yield on Germany’s 10-year Bunds have dropped by a further 2.6 basis points to reach 1.12%, which, except for the distortions caused by the country’s hyperinflation in the 1920s, is the country’s lowest borrowing rate in more than 200 years.
Germany’s previous record-low yield, of 1.127%, was set in June 2012 amid the eurozone crisis, when an exit by Greece appeared to be a very real possibility and investors were alarmed by the mounting debts of Spain and Italy.
Benchmark government borrowing costs for the Netherlands have fallen to a 500-year low, according to data compiled by Deutsche Bank and Global Fund Derivatives (GFD).
Spain’s benchmark government borrowing costs are below 2.5%, the lowest in 200 years, while French 10-year yields have fallen to 1.52%, the lowest point reached over a period of more than 250 years.
Italian benchmark government bond yields, which currently stand at 2.64% per cent, have only been lower for a brief period in 1945.
The paper said that Europe’s plans to impose further economic sanctions against Russia have contributed to yields moving lower as investors consider the potential impact of the move on the eurozone’s sluggish economic recovery.
However, the main driver of low yields has been the European Central Bank’s (ECB) efforts to counter deflation by recently cutting a key interest rate below zero and leaving the door open to a government bond purchase programme should inflation remain low.
The US money market fund reforms came into effect in 2016 and are already dramatically shaping US fund industry with investors flooding out of prime funds and into government securities. While the reforms are similar, they are not the same. GTNews interviews Yeng Bulter, global head of the cash business at State Street Global Advisors on the differences.
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