The Switzerland’s government bond yields sunk below zero for the time Tuesday on rising concern about the outlook for economic growth and inflation. Also, UK's vote to leave EU shifted investors towards safe-haven buying. The yield on the benchmark 10-year bond fell 3-1/2 basis points to -0.615 percent, yield on 30-year bonds dipped 1 basis point to -0.084 percent and yield on super-long 50-year bond tumbled nearly 3 basis points to -0.003 percent by 09:40 GMT.
Negative bond yield means that investors need to pay to the Swiss government for the privilege of lending to them out to 50 years.
Moreover, investors were cautious amid expectation that major global central banks would provide monetary stimulus to offset the impact on growth from Britain’s decision to leave the European Union.
In terms of data, the consumer inflation reversed positive trend rising tad 0.1 percent in May against 0.3 percent April reading, while the annual number stagnated at -0.4 percent. Similarly, first quarter of 2016 Gross Domestic Product (GDP) increased marginally 0.1 percent, lower than the market consensus of 0.3 percent, as compared to 0.4 percent in the last quarter of 2015. On a yearly basis, economic growth improved to 0.7 percent from 0.3 percent. Nonetheless, it was slower than the 0.9 percent rise forecast by economists.
“It's a reflection on the very bad prospects for the European and global economy,” said Ciaran O'Hagan, senior rates strategist at Societe Generale in Paris to Reuters.
“Bond yields are driven by inflation and growth, but there's no inflation and there's no growth. The economy is built on confidence, and if there's no confidence there's no economy,” he said.
Meanwhile, the Swiss Market Index (SMI) fell 1.81 percent at 7,962.5 by 09:40 GMT.
The material has been provided by InstaForex Company – www.instaforex.com