Kathy Jones, the chief fixed income strategist at Charles Schwab in NY, said her team has taken a cautious approach to developed-market worldwide bonds for that very reason. Benchmark 10-year gilt yields fell 13 basis points to 0.965%, according to electronic trading platform Tradeweb.
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Gross joins money managers from Deutsche Bank AG’s Private Wealth Management unit, Eagle Asset Management and Sage Advisory Partners in saying 10-year note yields may fall to 1.25 percent, below the record 1.38 percent reached in July 2012.
Reports released Tuesday showed signs the USA economy continues to strengthen. The price of the 0.625 percent security due June 2018 was 100. Brexit cast doubt on whether US gross domestic product would accelerate much following a sluggish first quarter which posted a modest 1.1 percent growth pace.
“When you have German rates negative and Japan negative, US rates can go significantly lower”, said Mark MacQueen, co-founder of Sage Advisory Services Ltd., which oversees $12 billion in Austin, Texas. The United Kingdom’s decision to quit the European Union after more than four decades came as a big blow to financial markets, which had priced in a vote to remain in the 28-nation bloc even though polls showed the referendum was too close to call. “As the Fed looks at conditions here, they don’t seem to suggest, at least for now, a need for easing”.
British 10-year government bond yields sank below 1 percent for the first time ever and sterling hit a fresh 31-year low versus the dollar as investors bet Brexit will trigger a Bank of England rate cut. Equity markets rose in the USA and Europe.
“We’ve got an exceptionally strong initial reaction after the “Leave” vote, and now the market is taking a wait-and-see stance for new guidance and impetus”, said Jussi Hiljanen, head of European macro and fixed-income research at SEB AB in Stockholm.
For Rieder at BlackRock, longer-dated Treasuries offer the best value, and yields could rally by 15 to 20 basis points relative to shorter-term debt.
“I like long-end Treasuries here”, Rieder said.
Fears of Brexit’s impact on global economic growth as well as expectations of more stimulus from the Bank of Japan also underpinned demand at an auction of two-year JGBs.
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The difference between long and short investors, or net longs, more than doubled to 25 percent, which was the most since December 6, 2010, from 11 percent last week.
