Govt bond yields slide as 'fear' grips globe

Government bond yields have continued to dive today as ‘fear’ grips global risk assets.

As European equity markets plummet more than 2% in midday trading, bond investors continue to pursue a ‘flight to safety' - namely bunds, treasuries and gilts.

The 10-year gilt yield has fallen 0.03% to 3.55% at 12:15pm, while the 10-year treasury is 0.04% lower to 3.25% and the 10-year bund has dipped 0.06% to 2.6%.

Peripheral Europe continues to sell-off as investors move away from the stricken euro, with yields on the 10-year Greek and Spanish bonds up 0.11% and 0.04% respectively.

The euro has been pounded in Tuesday trading, falling 1.2% against sterling and 1.4% on the dollar

Ignis head of credit portfolio management Chris Bowie says there are no signs of a near-term ending in the risk asset sell-off.

"This very much feels like fear to me," Bowie says. "In an environment like this, how long is a piece of string? Who knows?

"However, volumes are thin, so you could see some sharp appreciation."

Bowie can see the 10-year gilt yield falling under 3.5%.

"If it falls below 3.53%, the next resistance level I have is 3.29%," he adds. "So even 3.4% yield is a near-term possibility."