Investors seek safety in bonds on fears over economic outlook

Money poured into the world’s bond markets on Wednesday as investors shunned riskier investments such as stocks for the relative safety of government debt.

Gold, another safe-haven favourite, rose to levels last seen six years ago.

Official rate cuts from three central banks, including a surprisingly aggressive one by the Reserve Bank of New Zealand, served as a stark warning that a worsening US-China trade conflict is shaking confidence in global growth.

As bond prices surge, their yield or returns to investors fall, with benchmark 10-year government paper in the US and elsewhere dropping to multi-year lows.

Markets now believe that the world’s key central banks will cut interest rates further to stave off, or at least alleviate, any coming slowdown, analysts said.

Crucially, the hefty cut by remote New Zealand may be a precursor to deeper US Federal Reserve easing, suggested Ipek Ozkardeskaya, Senior Market Analyst at London Capital Group. “The surprise rate action from the RBNZ can only spur expectations of a similar size cut from the Federal Reserve,” she said.

US Treasury yields showed a fall of 0.12 percentage points on the day, outdone among developed economies only by New Zealand yields following the rate cut.

Ten-year yields elsewhere eased by 0.06 points or more.

“Rates falling everywhere,” observed analysts at Moneycorp.