US and UK government bonds show income inversion for the first time since the financial crisis

UNITED STATES, WASHINGTON (VOP TODAY NEWS) — Interest rates on 10-year US and British government bonds for the first time since the financial crisis fell below the rates on 2-year bonds.

The development of the situation in the US, German and British debt markets, as well as weak data on the German economy, are increasingly warning about the growing risks of recession in the developed economies of the world.

Interest rates on 10-year US government bonds, according to FactSet, on Wednesday, August 14, fell to 1.619%. At the same time, yields on 2-year securities fell to 1.628%. Prior to this, the excess of interest rates on 2-year treasuries over rates on 10-year US government bonds was recorded 12 years ago – in 2007.

In addition, there was also a drop in interest rates on 30-year US government bonds to a new historic low of 2.0139%. The previous minimum value was 2.0882%.

Yields on long and short bonds were also noted in the UK debt market: rates on 10-year British government bonds fell to 0.475% on August 14, 2019, while rates on 2-year government bonds rose to 0.478%. For Great Britain, the phenomenon of income inversion was last noted in mid-2008.

A day earlier, the situation in the US debt market raises more and more concerns among investors against the background of an approaching inversion of returns.

An additional negative factor in this situation is also an increasingly clear manifestation of the risks of recession in the largest eurozone economy. German GDP in the II quarter fell by 0.1%. At the same time, a decrease in interest rates is also observed in the government bond market of the country.

On Wednesday, interest rates on 10-year government bonds of Germany fell to a record low of -0.64%. Yields on 30-year German government bonds also updated the anti-record, dropping to -0.173%.

The alarming dynamics in the debt market of developed countries on Wednesday, August 14, reflected on investor sentiment in equity markets: the main European stock indices – DAX, CAC 40, FTSE 100, IBEX 35 – fell by an average of 1.4-2.1% .

In the US, the stock market also opened with a noticeable decline in quotations: the fall of the Dow Jones, S&P 500 and Nasdaq indices at the beginning of the trading session exceeded 2%.

Concerns about the recession in developed countries, the slowdown in the global economy as a whole and the potential decline in demand also put serious pressure on the value of commodity assets. Stock quotes for Brent and WTI crude oil fell 4%. Against a general negative background, and also due to weak data on the Chinese economy, exchange prices for copper and a number of other industrial metals fell on Wednesday.


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