Japan 10-year bond yield goes negative for first time
The yield on Japan's 10-year government bond dropped below zero Tuesday, in a first for a G7 country as panicked investors flee a bloodbath on equity markets. The note's effective return slipped to -0.005 percent in the afternoon, continuing a downtrend sparked by the Bank of Japan's surprise move last month to slap a negative interest rate on some commercial lenders' deposits.
Before the unexpected decision, Japan's 10-year bond was paying a yield of about 0.2 percent, similar to the current payout on a comparable German government bond.
By comparison, the United States pays about 1.7 percent on a 10-year bond while hard-hit Greece must pay a nearly 10 percent yield on its decade-long notes to attract wary investors.
The decline in the yield -- effectively the rate of return for a bond if held to maturity -- reflects rising demand for Japanese government debt, and investors' worries about putting more money into equities. "It's almost like a panic," said Hideo Shimomura, the chief fund investor in Tokyo at Mitsubishi UFJ Kokusai Asset Management. "The flight to quality is exaggerated."Bonds, and especially gov- ernment bonds, are generally seen as super safe investments where capital is all-but guaranteed, even if they pay very little -- or no -- interest.