Bonds: UK, German, Swiss bond yields hit fresh lows

These were the movements in the most widely-followed 10-year sovereign bond yields:

US: 1.69% (-1bp)

UK: 1.24% (-1bp)

Germany: 0.03% (-2bp)

France: 0.39% (-2bp)

Italy: 1.38% (-1bp)

Spain: 1.42% (-1bp)

Japan: -0.13% (-3bp)

Portugal: 3.07% (-1bp)

Greece: 7.38% (-3bp)

Longer-term sovereign bonds registered small gains on Thursday, pushing their yields slightly lower ahead of next week's US Fed policy meeting and the EU referendum the week afterwards.

Usually such movements would be considered unremarkable, but on this occasion UK, German and Swiss 10-year debt yields all set fresh record lows in the session, reigniting all sorts of market commentary spanning from concerns about banks’ profitability to the damage that – according to some - negative interest rates can wreak.

“Yesterday's move actually meant Bund yields were 41% tighter on the day and is the third time in five days that yields have tightened by over 40%! Bloomberg's global developed sovereign bond index is now yielding just 0.601%, the lowest on record after starting the year at 1.021%,” said Deutsche Bank’ s Jim Reid in a research note sent to clients.

Negative economic data published in Asia may have fed downbeat sentiment.

Core machine tool orders in Japan dropped by 11.0% month-on-month in May, far more than the 3.0% rise pencilled in by analysts.

Although Thursday’s poor reading may have been the result of the two severe earthquakes that hit Kyushu island, market commentary emphasised the downside risks for second quarter Japanese GDP from the figures.

An unexpected slowdown in Chinese consumer price inflation from 2.3% in April to 2.0% in May (consensus: 2.3%) may also have ruffled some feathers.

In parallel, South Korea’s central bank surprised markets by deciding to slash its main policy rate by 25 basis points to 1.25%.

To take note of, delivering a lecture in Brussels European Central Bank president Mario Draghi lambasted Eurozone governments for not moving quickly enough on structural reforms and for the mistakes made on the fiscal policy front, which had worked at cross-purposes with the ECB’s own policies.