NEW YORK: US Treasury yields fell to a four-month low on Monday as increased fears about Britain exiting the European Union weighed on investor risk appetite and sovereign debt yields in developed markets around the globe fell to all-time lows.
The overall risk-off sentiment pushed yields on 10-year US Treasuries to their lowest since February as investors sold riskier assets in favor of safe-haven US government debt. That increased prices, which move in the opposite direction of yields, two days before the release of the Federal Open Market Committee's decision on whether to raise US overnight interest rates.
Ten-year yields in Germany remained near zero, close to record lows, on Monday while Japanese and U.K. 10-year government bonds fell to their lowest levels on record. German Bund yields, the benchmark for borrowing costs across the euro zone, fell more than 10 basis points last week to as low as 0.01 percent.
"The US market is still the best house in a bad neighborhood and therefore you're getting lots of flows and declining yields and rising prices with US Treasuries," said Bill Northey, chief investment officer for the Private Client Group at US Bank in Helena, Montana.
Benchmark 10-year notes rose 2/32 in price to
yield 1.63 percent, after earlier falling to 1.61 percent, the lowest since Feb. 11.
Plunging yields across the globe have increased the relative attractiveness of Treasuries. German 10-year government bonds currently yield 0.028 percent while British 10-year sovereign bonds offer yields of 1.23 percent.
Japanese government bonds hold a negative yield, meaning investors will not be paid the full value of principal invested, out to 10 years. Ten-year Japanese government bonds yield -0.158 percent.
Investors' search for safety was compounded by the increasing uncertainty about whether Britain will leave the EU as part of a so-called Brexit. One poll released on Friday showed the "Leave" camp 10 points ahead of "Remain" in the referendum that will be held on June 23.
"That is causing a risk-off rotation as you see more and more polls indicate it will be either a very close vote or in some cases there has been some outright views that (Britain) will depart," Northey said. "There are a lot of concerns that can emanate from a vote that has an uncertain outcome."