Investors swap equities for U.S. treasury bonds, yen amid Brexit fears
Investors swapped equities for less risky assets such as U.S. treasury bonds and the Japanese yen on Friday on fears about the potential impact of the British referendum vote in less than two weeks on whether it should leave the European Union.
An index of world equity markets fell after having snapped a five-day winning streak on Thursday, while oil prices slid and were off 2016 highs hit this week due to a stronger dollar.
U.S. Treasury yields, which move in the opposite direction of prices, fell to more than three-month lows as European sovereign debt yields plunged on continuing concerns about global growth and a potential British exit from the EU.
Britain will hold a referendum on its European Union membership on June 23.
Ten-year yields in Germany, Japan and Britain all struck record lows. German Bund yields, the benchmark for borrowing costs across the euro zone, have fallen almost 10 basis points in little over a week to as low as 0.021 percent DE10YT=TWEB.
“There is some flight to safety because of concerns about ‘Brexit,'” said Lou Brien, a market strategist at DRW Trading in Chicago.
Investors ditched stocks in favor of assets considered safer during times of economic uncertainty, such as bonds, gold, and the yen.
Though bookmakers’ odds point toward a British vote to stay in the EU, polls suggest a neck-to-neck race.
Wall Street followed the lead of Asian and European stocks and fell.
The Dow Jones industrial average .DJI fell 96.94 points, or 0.54 percent, at 17,888.25, the S&P 500 .SPX lost 16.29 points, or 0.77 percent, at 2,099.19 and the Nasdaq Composite .IXIC dropped 49.22 points, or 0.99 percent, at 4,909.39.
The MSCI world equity index .MIWD00000PUS of shares in 45 nations was down 1.37 percent.
Europe’s broad FTSEurofirst 300 index .FTEU3 suffered its biggest drop in four months. The index fell 2.34 percent at 1,308.83, as political worries put pressure on cyclical stocks.
In the currency market, the yen and Swiss franc rose as oil prices slid and bank shares led global equity markets lower, stoking a fresh wave of bids for low-risk assets.
