The furious global bond rally powered ahead on Thursday, with Treasury and bund yields falling as risk sentiment soured alongside the latest adverse trade war headlines out of Beijing.
30-year yields, which had fought their way back above 2% after breaching the threshold, fell 6bps to a new record low as markets digest Beijing’s promise to retaliate against Donald Trump’s latest tariffs, set to take effect on September 1.
10-year yields in Germany fell to -0.68%, and are now nearly 30bps below the ECB depo rate.
Meanwhile, the global pile of negative-yielding debt ballooned past $16 trillion, as global growth fears proliferate, exacerbated by the 2s10s inversion in the US.
The ferocity of the move in the US long bond is truly something to behold.
The “policy impotence” trade seems to have arrived. With the global manufacturing slump poised to morph into an outright downturn and with policymakers constrained in their ability to fight back, the bond market simply doesn’t believe in central banks’ capacity to reflate.
Little wonder that “quantitative failure” is at the top of European investors’ worry list.