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Australian bond yields recorded their largest decline in a day for more than three years, reaching a new record low as investors rushed on the threat of US President Donald Trump to impose more tariffs raised in China.
Yields on three- and five-year bonds fell by more than 11 basis points, while yields on the 10-year bond fell nine basis points, their biggest one-day drop since June 24 2016, voting day of the United Kingdom. leave the European Union.
These declines followed a similar collapse in US bond yields as five-year US Treasury bonds lost eight basis points.
Bond yields are falling as more and more investors buy investments in the "safe harbor", usually because they fear global growth prospects.
Australian bond yields have been under pressure since November due to the economic slowdown, expectations, then the reality of interest rate cuts and the low inflation rate, said the senior economist of AMP, Shane Oliver.
The three-year bond yields went from 1.9% in November to 0.83% on Thursday, now reaching 0.74% Friday morning.
"It's an incredibly low level," said Dr. Oliver.
Australian 10-year bond yields went from 2.7% in November to 1.1%, while five-year yields went from 2.2% to 0.77%.
Australian bonds are considered more attractive than European and Japanese bonds with negative returns, he said.
The extremely low returns will have a limited impact on the entire Australian economy, said Dr. Oliver.
But this could mean lower fixed-rate mortgages for new borrowers and make borrowing money cheaper for large companies, since corporate bond yields are based on government bonds.
Low returns would also be beneficial for pension funds, which often hold between 15% and 20% of their bond portfolio.
Low yields mean that existing bonds are worth more, said Dr. Oliver.
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