A rebound in global bond markets began on Thursday due to the fact that less and fewer people believe that the Federal Reserve will raise rates anytime soon. As a result, production of German Bunds have been brought down to record lows, and a good amount of stress has been placed upon the world’s largest banks. The dollar hit its lowest point in five weeks against the yen. The dollar had been negatively impacted by declining Treasury yields with investors choosing the less risky Japanese yen over the dollar. In addition, investors were inclined towards bonds such as Bunds in because of large political risks such as the referendum this month that will decide whether or not the UK will leave the European Union.
German 10-year Bund yields fell to a low of 0.034%, which is not very far from negative regions where over $10 trillions worth of bonds internationally is already trading at. The 10-year Treasury yields also dropped to their lowest point since February. At the same time, the British 10-year gilt yields fell to its lowest point ever. Investors have all basically decided that there is not going to be a rate increase during the Fed Reserve’s policy review that is going to occur between June 14th and June 15th. Investors have lowered the chances of a rate hike to about twenty-six percent. Due to concerns over whether or not Britain is going to exit the European Union, investors are not sure if the Federal Reserve is going to raise interest rates within the next couple of months.
“The dollar has generally been a safe haven, particularly against emerging market currencies. But it remains underperforming against the more traditional safe havens like the yen,” Alvin Tan, a strategist at Societe Generale, said.