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Bond yields are tumbling to record lows

Published 07/06/2016, 08:11 AM
Updated 07/06/2016, 09:12 AM
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Three of the assets that do well when investors are stressed about something major are all rallying on Wednesday.

Gold is near a three-year high, the Japanese yen is soaring, and bonds worldwide are rallying, sending yields to record lows.

The US 10-year yield is down three basis points to 1.328%. It hit a record low for a second-straight day earlier on Wednesday.

The yields on 10-year gilts in the UK and Japan's 10-year bond also fell to new lows.

Gold futures are up 1.14%, or $15.45 an ounce, to $1,374.15, after rising to the best level in nearly three years earlier. UBS strategist Joni Teves said in a note on Tuesday that the precious metal has entered the early stages of a new bull run. She upgraded her annual forecast to an average price of $1,280 per ounce from $1,225.

The Japanese yen, another one of the so-called safe haven assets, is rallying against the dollar. The pair is down 1.25% to 100.48. It dropped to the lowest level since late 2013 earlier.

Meanwhile, stock futures are lower, following a close in the red on Tuesday. Dow futures are down 99 points (-0.56%), S&P 500 futures are down 11 points (-0.55%), and Nasdaq futures are down 28 points (-0.66%.)

A lot of the angst is coming from Europe, where the fallout of the British referendum to leave the European Union is still largely uncertain but there are early signs of stress. Several asset managers followed Standard Life (LON:SL) Investment's move on Monday to freeze withdrawals from their property funds, following a spike in redemptions.

That's sent stocks in that sector lower in London trading.

The pound took another leg lower on Wednesday after falling to a 31-year low earlier this week. It is below $1.30 against the dollar at 1.2967.

In US economic data, the trade deficit widened more than expected in May, by 10.1% to -$41.1 billion, according to the Commerce Department. Markit's services PMI and ISM's non-manufacturing index for June are due at 9:45 a.m. and 10 a.m., respectively.

At 2 p.m., the Federal Reserve will release the minutes of its June meeting, which was held after the unexpectedly weak May jobs report, but before Brexit.

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