In the midst of a stock crisis with few precedents and the worst ever sovereign debt crisis plaguing the Eurozone, bonds one of the few save havens investors are running to. Specifically, they are buying them from the United States, England and Germany.
Bond overbuying caused yields to drop to historical lows. For example, yields on US 10-year treasury bonds fell to beneath two points for the first time in the country?s history. The trading session was frenetic then, but the yield eventually rose to 2.08%. This is another clear indicator that there are more and more investors who are starting to protect their assets as they face a recession that is not only American, but global.
The fear of worldwide recession was also observed in the European bond market. The German bund, which improved somewhat after the European Central Bank slowed a buying spree on peripheral bonds, is what investors in the old country are returning to. So the yields dropped to 2.03%. Despite later rebounding to 2.08%, this is still an historical daily low.
With this incredible downward movement, combined with the slight rebound of Spanish bonds to 4.98%, the Spanish risk premium shot up to above 290 basis points. This was the largest daily shift since the ECB intervened.
The UK, a country belonging to the European Union but generally free from its current troubles, also acted as a refuge for investors looking to exit the stock market. The yield on their 10-year treasuries fell to 2.31%, marking its historical nadir. Levels that will remain obsolete if the panic continues to toy with the markets day after day, investors are disappointed by economic figures and forecasts.
