8 to 14 August: Low Life

As the Bank of England re-started QE, the global hunt for yield continued last week. Not only did UK Gilts hit new records (10yr at 0.50%) but the FT reports the value of negative-yielding bonds rose to USD 13.4trn up USD 300bn on the week.

Actually, whilst it is perhaps the record low “risk-free” government bond yields which have caught the headlines in recent months, there is evidence of general spread compression. Peripheral European bonds have legged tighter and you can now own 10yr Spanish Government debt below 1% yield (0.93%). Moreover, US high yield spreads are at 10 month lows and net fund flows to emerging market debt are at 6 week highs, amounting to USD 18bn YTD.

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