Economics Weekly by Lloyds TSB

As the Bank of England embarks on a £150bn programme of buying securities from the private sector that will not be financed by an equivalent issue of government paper – so called quantitative easing – bond yields are falling around the world.

Despite rising supply, global bond yields still fall

As the Bank of England embarks on a £150bn programme of buying securities from the private sector that will not be financed by an equivalent issue of government paper – so called quantitative easing – bond yields are falling around the world. This is perhaps partly because of a perception that others around the world may also join the UK central bank in purchasing government debt, although there is no convincing evidence yet to support such a view. Indeed, the most likely reason for what is a coordinated fall in global yields could simply be the fact that the economic data flow in the last few weeks has been very poor for most countries. Admittedly, government bond yields in the UK have fallen more sharply than most this week, owing to the start of quantitative easing by the Bank of England, see chart a. This has left UK 10 year gilts yielding just under 3%, below the equivalent German government bond for the first time in seven years, though still above the US 10 year treasury.

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