Global bond market review: Bond yields plunge in August

Bond yields slid during August as nervous investors headed for perceived “safe-haven” assets such as government bonds and gold. Confidence is being undermined by concerns over prospects for the global economy, by the intensifying trade conflict between the US and China, and by the continuing saga of Brexit. 

  • The US yield curve remained inverted
  • The 30-year German Government bond traded negatively for the first time
  • The yield on the 30-year US Treasury Bond fell below 2% for the first time

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Bond yields slid during August as nervous investors headed for perceived “safe-haven” assets such as government bonds and gold. Confidence is being undermined by concerns over prospects for the global economy, by the intensifying trade conflict between the US and China, and by the continuing saga of Brexit. 

 “”CRAZY INVERTED YIELD CURVE!”” (President Donald Trump)

During August, the yield on the benchmark US Treasury bond dropped from 2.03% to 1.50%. The yield on the 30-year US Treasury Bond fell below 2% for the first time in history during August, and the US yield curve remained inverted during the whole of August, fuelling concerns over the economic outlook. Meanwhile, the benchmark German Government bond yield plunged from -0.52% to -0.92% during the month, and the 30-year German Government bond traded negatively for the first time ever.

Following a raft of interest-rate cuts last month – involving the US, Australia, South Korea, Brazil, South Africa and Turkey – central banks in India, Thailand and New Zealand reduced their key interest rates in August.

Economic data from Germany continued to weaken, compounding fears over the prospects of Europe’s largest economy. Germany’s economy contracted by 0.1% during the second quarter of 2019, and business confidence fell to its lowest level for almost seven years. 

The rift between the White House and the US central bank continued to widen during August. President Donald Trump continued to heap criticism on the Federal Reserve (Fed), tweeting: “Our problem is a Federal Reserve that is too proud to admit their mistake of acting too fast and tightening too fast (and that I was right!). They must Cut Rates bigger and faster, and stop their ridiculous quantitative tightening NOW.” Later in the month, President Trump described Fed Chair Jerome Powell as “clueless”, tweeting: “Our problem is with the Fed. Raised too much & too fast. Now too slow to cut … other countries say THANK YOU to clueless Jay Powell … CRAZY INVERTED YIELD CURVE! … the Fed is holding us back!”

Fixed income was the best-selling asset class for a fifth consecutive month during July, according to the Investment Association (IA), which cited investors’ concerns over trade and the global economic outlook. The best-selling IA sector during the month was £ Strategic Bond. Global Bonds, £ Corporate Bond, UK Index-Linked Gilts, and UK Gilts also figured in the top ten highest-selling sectors. 


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