Economics

The yield on German bunds has risen above UK gilts for the first time since 2009 after Japan shifted out of bunds overnight following Germany's disastrous debt auction.

A dire German bond auction rocked markets overnight, with Japan's Nikkei index hitting its lowest level since April 2009 as fears deepened over the eurozone crisis.

Ratings agency Standard & Poor's (S&P) has warned Japan could face a downgrade over its inability to reduce its debt pile.

The cost of insuring against a default by Bank of America reached a new high yesterday as investors' fears over US exposure to the European debt crisis deepened.

The FTSE 100 has seen its longest losing streak in eight years as investors continue to sell-off shares amid fears over the state of the eurozone.

So suddenly no-one wants to lend to Germany for the next ten years - hardly surprising because by lending to Germany investors are effectively lending money to Greece, Portugal and even Italy.

Kames Capital's bond fund manager Stephen Snowden said the ongoing crisis in Europe has left gilts looking much more secure than bunds in the medium term.

European equity markets and the euro fell deeper into the red today as Germany failed to attract buyers to its latest government debt auction.

Fears over the European debt crisis have escalated as a €6bn German bund auction fell flat today, showing investors are now demanding even higher compensation from an asset class previously seen as a safe haven.

The Bank of England's Monetary Policy Committee voted unanimously in favour of keeping bank rate at a record low of 0.5% and maintaining QE at current levels, while warning inflation is unlikely to fall as fast as expected.