A first: German bond yields fall below zero

June 14: The yield on Germany’s 10-year government bond, Europe’s benchmark security, fell below zero for the first time on record, as investors’ seemingly insatiable demand for haven assets created another bond-market milestone.

The nation joined Japan and Switzerland in having 10-year bond yields of less than zero. The plunge in yields, which has been driven by European Central Bank’s policy of negative interest rates and asset purchases,hasacceleratedamid a weakening global economic outlook and as polls indicate the “Leave” campaign in Britain’s EU referendum is gaining momentum.

“Nobody buys bunds at these yield levels thinking theyareattractive,”saidJussi Hiljanen, head of European macro- and fixed-income strategy at SEB AB in Stockholm. “Demand for haven assets is being driven by fear of Brexit and growth concern. Investors are buying bunds as a hedge against uncertainty.”

Benchmark German 10year bund yields fell four basis points, or 0.04 percentage point, to minus 0.02% , having touched minus 0.033%, the lowest since Bloomberg began collecting the data in 1989. The 0.5% security due February 2026 rose 0.42, or 4.20 euros per 1,000-euro ($1,122)faceamount,to105.02.

Bonds have been rallying aroundtheworld,withyields on 10-year UK, Swiss and Japanese bonds also falling to records, as investors seek shelter before Britain votes onwhethertoexittheworld’s largest trading bloc after a referendum next week. Four opinion polls from three separatecompanieshaveputthe campaign for Britain to leave the EU in front of the ‘Remain’ camp.

While the collapse in yields is good news for governments that are reaping lower borrowing costs and in some cases command a fee to hold investors’ money, it’s a sign that even after pouring in record amounts of stimulus, central banks are struggling to boost growth and inflation.

The German 10-year securities join the more than $2.8 trillion of euro-region debt that already has yields below zero, according to the Bloomberg Eurozone Sovereign Bond Index, meaning investors who buy the debt now and hold its to maturity will receive less than they paid.

Germany’s yield has slid from 0.63% at the end of 2015. So far, the drop in yield isn’t showing signs that it will ignite a reversal similar to what happened in April last year, when the previous record was followed by a selloff thatpushedyieldsupbya full percentage point in less than two months.

Even so, some investors areexpressingconcern.Negative yields are like “a supernova that will explode one day,” Bill Gross, the manager of the$1.4billionJanusGlobal Unconstrained Bond Fund, said in a tweet last week,whileAndreasGruber, chief investment officer of Allianz SE, which oversees 638 billion euros in assets, has said that German bunds are in “bubble territory.”

“There are better investmentsthannegative-yielding German bunds”, Kenneth Taubes, Pioneer Investment Management's Boston-based head of US investments, said in an interview with Bloomberg TV on Tuesday.

“Every day you own a bond like that you compound a loss, and the only way to make money is when someone else is willing to pay a higherprice.Asastoreof value I don’t see it as a very good investment.” Bloomberg