By Dhara Ranasinghe
LONDON (Reuters) - More than half of the British government bond market has negative yields, data from bond trading platform Tradeweb showed on Monday.
Global bond yields have fallen sharply in the past few weeks as the coronavirus outbreak has prompted concern about a prolonged economic downturn.
That has boosted demand for safe-haven bonds and increased speculation that central banks such as the Bank of England may have to consider cutting rates below 0% to shore up the economy.
According to Tradeweb, more than half of the British government bonds traded on its platform now carry negative yields.
Its data showed that the pile of negative-yielding gilts rose to around 1.33 trillion pounds ($1.74 trillion) as of end-July or just over 53% of a total market worth almost 2.5 trillion pounds. This was up from 1.17 trillion pounds as of end-June. (Graphic: Britain's gilt curve - https://fingfx.thomsonreuters.com/gfx/mkt/rlgpdnaggpo/giltcurve0308.png)
The British gilt curve out to eight years has yields in negative territory <0#GBBMK=>. On Friday, British 10-year government bond yields sank to their lowest on record at just 0.07% <GB10YT=RR>.
The pool of negative-yielding government bonds in the euro zone rose to 5.68 trillion euros ($6.67 trillion) or around 65% of the total market worth 8.7 trillion euros, the Tradeweb data showed. That was up from 5.24 trillion euros in June and the highest share since September.
Nearly 25% or 838 billion euros of the 3.4 trillion euro corporate investment-grade bonds on the platform traded with a negative-yield at the end of July, the highest since February, Tradeweb said.
Negative real interest rates, the bond yield adjusted for inflation, in the United States has contributed to U.S. dollar weakness. This has encouraged investors to buy government bonds in Europe and added to downward pressure on bond yields, analysts said.
"What's driving things right now is the change in flows and funds moving around the world," said Jim Caron, portfolio manager in global fixed income at Morgan Stanley Investment Management.
(This story refiles to clarifying that Jim Caron is portfolio manager in global fixed income at Morgan Stanley Investment Management)
(Reporting by Dhara Ranasinghe; editing by Simon Jessop and Jane Merriman)