The scramble for ultra-safe government bonds that provide a guaranteed income drove down US Treasury yields. The yield on benchmark US 10-year notes fell 17.8 basis points to 4.017 per cent, from 4.195 per cent late on Wednesday.
Euro area government bond yields dropped, with Germany’s 10-year yield, the euro area’s benchmark, down 7.5 bps at 2.65 per cent, after hitting 2.625 per cent, its lowest since Mar 4.
If the tariffs trigger recessions, central banks around the world are likely to slash interest rates, which benefit bonds.
Credit rating agency Fitch warned they were a “game-changer” for the US and global economy, while Deutsche Bank called them a “once in a lifetime” moment that could knock between 1 per cent – 1.5 per cent off US growth this year.
“Many countries will likely end up in a recession,” said Fitch’s head of US economic research, Olu Sonola. “You can throw most forecasts out the door if this tariff rate stays on for an extended period of time.”
Shortly afterwards, Fitch downgraded China’s credit rating, citing the steep US tariffs as a reason.
Oil prices dropped more than 6 per cent, with US crude down 7.07 per cent at US$66.64 a barrel and Brent at US$70.06 per barrel, down 6.55 per cent on the day.
Gold hit a record high above US$3,160 an ounce before running out of steam while Japan’s yen jumped. Spot gold fell 1.23 per cent to US$3,094.14 an ounce.
