British, US and European bond yields have fallen, in some cases to record lows, on the prospect of lower interest rates and other stimulus to counter the effects of the Brexit.
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The amount of interest Britain is having to offer to investors in its government bonds has fallen to a record low.
That is because the financial markets believe central banks will now have to cut interest rates and print money to buy bonds to counter the effects of Britain’s vote to leave the European Union.
The prospect of more money sloshing into the global economy also boosted share prices.
Trader Arthur Brunner with ICF said: “It is very clearly central bank policy that is keeping the markets busy. Yesterday there was a leak that the European Central Bank wants to change the way they buy bonds. This has inspired the markets and the interest paid on German government bonds has dived, the other side of the coin is share prices increased.”
The yields – that is the interest paid – on government bonds repayable in 10 years time fell in the United States to the lowest in four years.
Yields for larger European countries were also down with the French and Dutch 10-year bonds hitting record lows.
Euro Area bond yields are down significantly post-#Brexit: https://t.co/A75IToGv2D pic.twitter.com/7eOm6ehvoW
— IIF (@IIF) July 1, 2016
Speaking to Reuters, European Central Bank sources have poured cold water on a Bloomberg report that it is considering loosening the rules for its bond-buying stimulus programme.
The pound and the euro remain weak because of the Brexit vote.
Sterling has been dragged down by expectations that the Bank of England is going to have to ease monetary policy in coming months to cushion the UK economy from the impact of Britain’s shock vote to leave the EU.