Fixed Income Update

  March 23, 2016

Government bond yields from various developed countries fell into negative territory in February, as central banks applied further stimulus efforts.

Yields on the 2-year German bond fell to -0.53% and yields on Japanese 10-year bonds traded at -0.024%, a first for Japanese debt. 

As international yields fell in February, so did U.S. government and corporate yields. Mortgage rates also fell as key lending rates such as the 10-year Treasury fell to yields not seen since 2012. The lower-than-expected yields drew renewed concern about a global economic slowdown as well as leading to unintended market dynamics. Economists have traditionally seen lower yields prompt lending and spending, but some hoarding of cash has resulted instead. As rates have fallen below zero in certain markets, investors are better off holding cash themselves rather than paying governments to hold their cash.

 

Sources: Bloomberg

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