Bonds are a type of financial instrument that have traditionally been regarded as a solid, safe investment. They are loans made by investors to borrowers, who then repay lenders incrementally until the bond’s maturity. While bonds have never been great for earning substantial return on investment, they certainly have been a way to bolster investors’ portfolios as a means of reducing risk.
Bonds around the world haven’t been doing too well lately, which includes the United States Treasury bond, one of the most popular bonds on the global financial market.
For the very first time in history, the yield on the 30-year United States Treasury bond fell below 2 percent, falling to the level earlier this morning, on Thursday, Aug. 15, 2019, in Asian financial markets.
This all-time record came just one day after the 30-year U.S. Treasury bond matched its lowest yield in history, which took place on Wednesday, Aug. 14.
The 30-year United States Treasury bond fell to an all-time low of 1.9689 percent yield. While this wasn’t good news for the sake of the United States bond market, bonds from other countries that are considered economic powerhouses were performing much worse.
Take, for example, the 30-year Japanese government bond’s yield, which came in at 0.15 percent at the time the aforementioned record was hit. The 30-year German government bund – yes, that’s spelled correctly – fell to -0.201 percent.
There are several reasons why long-term bond yields have fallen throughout the month of August. One of the most important ones is the ongoing trade war between China and the United States. Up until two days ago, investors and traders thought that United States President Donald Trump was going to go through with the enactment of tariffs on a litany of items that would have taken place in two weeks, though he postponed them until the end of the year. People have also been concerned about GDP growth, as well as the likelihood that inflation isn’t doing too well and that central banks are likely to act aggressively in the coming weeks and months.
The 10-year U.S. Treasury bond yield fell below that of the 2-year U.S. Treasury bond, with the former dropping to 1.545 percent yield. The last time we saw such an inversion – in 2007 – as it’s called in financial markets, a recession happened just one year later.