Gilt yields hit new record lows

Tom Rees
·1-min read
covid
covid

Yieldson short-dated UK government debt yesterday hit record lows after bond markets wobbled on worries over accelerating Covid-19 case.

Investors sought safety in government bonds worldwide, as investors fret over the rise in coronavirus cases in the US, pushing short-dated gilt yields deeper into negative territory. The two-year and five-year gilt yields hit all-time lows of minus 0.113pc and minus 0.08pc, respectively.

Analysts also pinned rising bond prices on signs of appetite for safer government debt with the auction of 10-year Treasury notes fetching the lowest yield on record this week.

Gilt yields have fallen further in recent months as the economic outlook has darkened and speculation has swirled over the Bank of England cutting rates into negative territory.

Investors’ nerves about Covid-19 have returned on markets in recent days with stocks slipping on Thursday before staging a recovery yesterday. The World Health Organisation warned on Thursday the pandemic is still accelerating while several US states are reversing or pausing reopenings as infections rise.

“Surging Covid cases in several US states continue to weigh on risk sentiment,” said Neil Wilson, analyst at Markets.com. “Investors are showing no fears that massive issuance is going to force up borrowing costs as long as central banks remain in support mode.”

Richard McGuire, analyst at Rabobank, also said “virus-related concerns” and “specifically the record high number of deaths in Florida” was being blamed for the latest bout of worries.

Economists have warned that the US resurgence of the disease is starting to damage activity and the jobs recovery, particularly in the states worst affected.

The World Health Organisation warned on Thursday the pandemic is still accelerating.