German Bund yield at record low as Trump’s Mexico tariff vow rattles markets

German Bund yield at record low as Trump's Mexico tariff vow rattles markets
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LONDON (Reuters) – Germany’s 10-year bond yield slid to record lows on Friday, after U.S. President Donald Trump’s sudden threat to impose tariffs on Mexican goods sent shock waves through world markets and heightened fears of a global recession. Seen as unthinkable even a few weeks ago, the relentless fall in yields in what is seen as one of the world’s safest assets — German government debt — speaks to the scale of pessimism gripping investors. “The Trump Mexico tariffs surprised me and more so than the escalation in the trade war with China,” said Nordea chief market strategist Jan von Gerich. “This news is negative for markets and the economic outlook.” The global outlook darkened further and a rally in so-called safe assets — government bonds, yen and gold — accelerated after a measure of Chinese manufacturing activity in May disappointed. Dovish comments from the U.S. Federal Reserve’s Richard Clarida, saying the Fed would act if inflation stays too low or global risks endanger the economic outlook, only added to a sense that a U.S. rate cut may come sooner rather than later. Germany’s 10-year bond fell more than three basis points to a record low of minus 0.21%. It surpassed a previous all-time low hit in July 2016 just after Britain voted to leave the European Union. The yield is down more than 20 basis points this month. “Bund yields are at historic lows even as there are no real rate cuts priced in the euro area,” […]

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