German 10-year bond yield falls below zero for the first time since 2016

The benchmark German bond yield fell below zero for the first time since 2016. Investors bought the debt as more evidence showed a slowdown in the eurozone and a more accommodating outlook among global central banks .

The 10-year Bund yield, a rate critical for European fixed income markets, has traded at less than 0.002% on Friday, according to Tradeweb data.

Yields on paper have remained positive since October 2016, but the darkening outlook for Europe's largest economy has fueled demand for Bunds, considered one of the safest badets in the region, driving returns to zero. It had traded with a return higher than 0.2% earlier in March and 0.5% last fall.

Germany's short-term debt yields have been in negative territory for some time, but the move to sub-zero returns for the 10-year benchmark is a milestone in fund managers' journey away from home. risky bets. This means that investors who buy the paper and keep it until maturity face a guaranteed nominal loss.

Friday's rise in the Bund, which drove down yields, came after a strong survey showed that Germany's large manufacturing sector contracted in June at its highest level in more than six and a half years. At the same time, the French sectors of factories and services have resumed their contraction, revealed another survey.

Data for the euro area as a whole also indicate that manufacturing output in the currency area is contracting, with the worst result in five years.

"Any shock to the risk appetite (caused by the Brexit saga to name one) in the coming days may push German yields into negative territory, at least temporarily," said Tullia Bucco, an economist at UniCredit, before Friday's economic publications.

The more optimistic economic outlook for monetary policy, fueled by more sober economic data from major economies, including America and China, also played a leading role in the recovery of sovereign bond markets this week, said badysts and investors.

The Federal Reserve announced on Wednesday that it was not considering raising rates until the end of the year, while reducing its reduction in Treasury holdings. At the same time, the European Central Bank recently expressed a cautious view of the bloc's economy.

The decline in Bund yields on Friday toppled the euro, leaving it up 0.8% to USD 1,1287, its lowest level in six sessions.