This chart of the yield on the benchmark 10-year German bund shows how interest rates have been falling for more than a year. Note how the nine-week moving average capped the candles most of the time, quite spectacularly on the squeeze two weeks ago. With a nominal yield of 0.35 per cent and German deflation running at 0.5 per cent last month, the real yield is therefore 0.85 per cent, not much but better than parking cash at the European Central Bank and having 0.25 per cent docked off. We are just under the trend channel since unification, approaching the zero barrier, and are likely to slow down. Perhaps investors will shift to top-rated paper yielding more.
