Investing.com - Global bonds extended this week’s rally on Thursday, with yields on Japanese and German 10-year government bonds dropping deeper into negative territory as investors digested the latest monetary policy decisions from the Federal Reserve and Bank of Japan, while continuing to worry about a potential U.K. exit from the European Union.
The 10-year Japanese government bond yield hit a record low of -0.202% before climbing back to -0.198% by 09:25GMT, or 5:25AM ET. A negative yield implies investors are paying borrowers for the privilege of parking their cash. Bond prices move inversely to yields.
The Bank of Japan kept monetary policy steady on Thursday even as sluggish global growth and anemic inflation put policymakers under pressure to do more to reflate the economy out of stagnation, bolstering the yen and battering Tokyo stocks.
The yen rallied nearly 2% against the dollar to hit 103.56, the strongest level since August 2014, while the Nikkei 225 plunged 3% following the BoJ's decision.
Meanwhile, German 10-year bonds fell to an all-time low of -0.035%. It last stood at -0.016%, down 0.2 basis points, or 15.0%, while U.K. 10-year bond yields traded at 1.122%, after hitting a record low of 1.090%, as global concerns over a Brexit left investors scrambling for safe haven assets.
A series of recent opinion polls showed support for the "leave" camp was picking up momentum ahead of the country's June 23 referendum. A vote by Britain to leave the European Union may tip Europe back into recession, putting more pressure on the global economy.
Elsewhere, the yield on U.S. 10-Year Treasurys slipped 3.4 basis points, or 2.13%, to hit 1.560%, the lowest since February 12, as fading expectations for U.S. rate hikes this year provided further fuel to a global bond market rally.
The Fed kept interest rates unchanged on Wednesday, but dialed back forecasts for how fast it will raise rates over the next couple of years, citing concerns over the economic outlook.
While the U.S. central bank retained its forecast for two rates this year, updated projections revealed that six members wanted to see one rate hike this year, compared to just one policymaker in March. Fed forecasts also show at least four fewer hikes than previously projected through 2018.
Market players are pricing in just an 8% chance for a rate hike in July, down from around 20% a day earlier, and 29% for September, according to CME Group's (NASDAQ:CME) FedWatch tool. December odds were at about 48%, compared to 59% ahead of the Fed outcome.