Global bond yields plunge as investors flee to safety amid stock market selloff

Bond markets around the world are surging as investors rush to safer assets, driven by a sharp selloff in global equities following former US President Donald Trump’s recent tariff announcement.

Fears of a potential global economic slowdown and heightened market uncertainty have triggered a steep drop in government bond yields across major economies.

In Europe, Germany’s 10-year bund yield—widely seen as the benchmark for the eurozone—slipped from 2.72% last Wednesday to 2.59% by Monday afternoon.

Just weeks ago, yields had topped 2.9% as markets priced in a surge in fiscal spending plans for Europe’s largest economy.

Since bond yields move inversely to prices, falling yields signal a surge in demand for safer government debt.

Across the Atlantic, US bond markets also reflected investor anxiety.

The 2-year Treasury yield sank to around 3.58%, its lowest level since September 2022.

Looks like we’ve got a trade war on our hands. Bond market is not responding as the administration might want. Ten-year yields are back above 4%.

Meanwhile, the benchmark 10-year Treasury yield hovered just below the crucial 4% mark, where it last stood in October 2024, signaling persistent caution.

Asian markets mirrored the trend

Japan’s 10-year government bond yield dropped to a three-month low on Monday, capping off its steepest weekly decline since 1998, according to Deutsche Bank economists.

Investors are grappling with the potential fallout of aggressive tariff policies, uncertain global growth prospects, and how central banks might adjust their monetary strategies.

Analysts at Rabobank noted that while a reversal of Trump’s tariff measures could ease market jitters temporarily, it may not fully restore investor confidence.

“The Bund rally is unwinding the region-wide tightening of financial conditions,” Rabobank analysts told CNBC.

They added that the unpredictability of current policies remains a major drag on market sentiment and risk appetite, regardless of any short-term policy shifts.

As concerns about recession risks mount, the rush into bonds underscores the fragile state of global financial markets, with traders seeking shelter from increasing volatility.