British Debt Interest Tanks After Brexit

[Economy 52,879]

https://www.google.ca/amp/www.marketwatch.com/amp/story/guid/4C83372E-9C2A-492F-ACEB-DB61607DA9B1#

 

British 10 year debt bonds droped to 0.96%  despite the downgrade as investors dump risky British Equities amid uncertainty and but Government debt as a safe heaven

 

Britain joins Canada, Germany, Japan and France among others who have interest rates below 1%

 

Global uncertainty continues to weigh on fixed income. Japan debt for example currently yields only 0.4%

[ryanripley 86,575]

...is this good or bad?  

[Economy 52,879]

3 minutes ago, ryanripley said:

...is this good or bad?  

Both...

 

Good in the sense that Britain is spending less money on interest helping the financial situation

 

But bad because the reason interest rates dropped is not a good reason

 

2 things influence government interest rates. Safety perception and economic status

 

When the economy is strong investors invest more in riskier assets like stocks. Also the Central Bank tends ro raise rates to tame inflation. As a result bond yields in fixed income tend to go up to entice investors to still invest in debt (bonds). When economy is good interest rates rise and down when its bad, interest rates drop

 

But thats because Government bonds are seen as safe since Government rarely default. But if a Governments financial situation gets very dire, then investors dont see Government bonds as safe anymore and they will seek out another safe heaven. So in extreme cases like Greece, bad economy actually makes debt interest rise

 

countries with an economy thats growing poorly but investors still see Government as intact enough to be a safe heaven, are the Countries that usually will have the lowest interest rates!

[DeanWinchester 41,390]

Thank God I never invested in european funds