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German Bund Near Zero Yield
World Economy

German Bund Near Zero Yield

Europe's benchmark government bond, the 10-year German Bund, had a zero yield firmly in its sights on Friday as worries about a potential British exit from the EU and weakened US rate hike expectations extended the week's global bond rally.

Investors sought refuge in safe-haven assets amid festering concerns over the June 23 Brexit referendum, though the appeal of ultra-low borrowing costs and a ninth week of gains for oil in the last ten kept world stocks positive for the week, Reuters reported.

However MSCI's 46-country All World Index was down 0.4% for the day. Europe and its banks and commodity stocks fell 0.9% early on after Asia ended an otherwise solid week 1% lower. It was bond markets though that demanded the attention as Germany's 10-year Bund yield inched to a new record of 0.02% and zero looming large.

"It is the combination of the renewed Brexit concerns and last week's weak payrolls that have reduced Fed (rate hike) expectations," said UniCredit strategist Luca Cazzulani in Milan.

More than $10 trillion of government debt globally now has negative yields meaning that investors pay rather than get paid to hold them. The ECB is adding to the mix again this week by starting to buy corporate bonds.

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