Investors preferred bonds on the eve of global uncertainty and a Fed rate cut

​Against the backdrop of a slowing global economy and tensions in the Middle East, investors have increased their demand for bonds and the global bond market has accelerated.

Bloomberg reported on Monday (August 5) that Asian investment-grade dollar bond spreads widened by at least 10 basis points, the largest increase in 22 months; Japan's benchmark 10-year government bond also fell 17 basis points to 0.785 per cent, its lowest level since April.

Yields on five - and seven-year Japanese government bonds also fell, triggering circuit breakers on Japanese government bonds.

In addition, traders' expectations of an imminent rate cut by the Federal Reserve also increased demand for government bonds and triggered sharp declines in Japanese and U.S. stock markets. Some Canadian and European central banks have begun to ease policy.

However, Makoto Suzuki, senior bond strategist at Okasan Securities Group, said "the current move in the bond market could be affected or delayed by the BOJ's additional rate hike and caution ahead of tomorrow's 10-year JGBS auction".