The haven currencies and bunds and bonds are really making the most of the “risk off” days and from a longer-term trend perspective they’ve been unstoppable.
The yen is making 15 year highs versus the US dollar. US government bonds have seen yields driven down to an average of 3.68%, there are more stocks with higher dividend yields than at any time since the mid 90’s . German government bonds, considered the Treasuries of Europe, have also seen yields driven down relentlessly as capital seeks shelter from the palpable uncertainty.
But nothing exemplifies the haven trade better than what’s happening in the Swiss franc – since the beginning of August it’s just been tearing up the euro like there’s no tomorrow…
So what’s the story here? We don’t quite know yet, but the beginning of it certainly starts with the banks. There’s simply no love or trust for the financial institutions of Europe, this summer’s stress tests notwhithstanding. Cash is seeking gold-denominated currencies, reserve currencies, realism, safety of principle, politcally stable assets etc.
The Swiss franc’s buoyancy right now is the epitome of this theme.