UK government borrowing costs fell to a four-month low yesterday as investors fled to safe haven bonds amid the global stock market sell-off.
The interest rate on 10-year government bonds, known as gilts, dropped to below 4.38 per cent, their lowest since December last year.
But on another day of sharps ups and downs for markets, they later climbed to more than 4.6 per cent.
It was a similar story for US 10-year bond yields, which dropped to around 3.87 per cent, hovering around the lowest level since October, before rising sharply to more than 4.2 per cent later in the day.
Money has piled into bonds as investors pull out of stocks amid recession fears sparked by Donald Trump’s tariffs.
Meanwhile, gold, another traditional safe haven, fell back yesterday from its recent record high of more than $3,167 per ounce, dipping below $3,000.
Safe haven: The interest rate on 10-year government bonds, known as gilts, dropped to below 4.38%, their lowest since December last year
And copper, traditionally a bellwether of economic growth, tumbled more than 6pc to $8,780 per tonne.
The dollar weakened as the sweeping imposition of tariffs by Trump raised questions about the US’s economic dominance amid growing fears that the free-trade-focused world order could be unravelling.
The VIX index, which tracks uncertainty in global stock markets and is often dubbed the ‘fear gauge’, shot up over 9 per cent to nearly 50, well above the level of 45 which is used by the Bank of England to trigger stress tests to ensure UK banks can cope with a meltdown in the financial system.
Market watchers continued to sound the alarm over the chaos.
Paul Diggle, chief economist at asset manager Aberdeen, said a ‘disorderly breakdown’ in the market ‘might not be far away’ and could see the US Federal Reserve step in to prevent a bigger crisis unfolding.
Meanwhile, Tom Stevenson, investment director at Fidelity International, said the world’s central banks found themselves in ‘a difficult place’ as the tariff measures weighed on the global economy.
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