Demand for German government bonds — seen as one of the safest financial securities in the world — intensified yesterday as US President Donald Trump issued a new round of fiery rhetoric against North Korea.
Trump said his earlier threat to unleash “fire and fury” on Pyongyang might not have been tough enough, after North Korea’s state run news agency said earlier it would complete plans in the middle of this month to fire four missiles to land near Guam.
MARKET ROUT
US and Asian stocks plunged overnight, with investors instead fleeing to safe haven assets, including German government bonds, among the best-rated and most liquid assets in the world.
Equity benchmarks from Hong Kong to Sydney yesterday extended losses and European equity index futures fell after the S&P 500 Index halted an unprecedented stretch of calm on US equity markets, and the CBOE Volatility Index soared 44 percent.
South Korea’s stocks and currency fell while volatility spiked.
“Geopolitical tensions are the main focus. The S&P 500 was down 1.5 percent last night and many investors are becoming risk averse. That is helpful for German bonds,” DZ Bank AG strategist Andy Cossor said.
BOND YIELDS DROP
As a result, Germany’s 10-year government bond yields — which move inversely to the price — dropped below 0.4 percent for the first time since June 29, almost 20 basis points below its peak last month.
The fall comes even though long-term eurozone inflation expectations remain fairly high and investors are anticipating a withdrawal of extraordinary monetary stimulus from the European Central Bank, factors that should normally push yields higher.
Japanese, British and US 10-year government bond yields are also at or close to their lowest level since late June.
The gap between Italian and German borrowing costs — a closely followed measure of political tensions — reached its widest level in more than three weeks yesterday.
“If you’re looking for safe haven assets then German bonds definitely is a better bet than Italy, but then all the peripheral spreads were close to lows so probably investors were happy to take profits as well,” Cossor said.
The Italy-Germany 10-year bond yield spread widened to 162 basis points, as much as 10 basis points wider than a month earlier.
MAJOR BENEFICIARY: The company benefits from TSMC’s advanced packaging scarcity, given robust demand for Nvidia AI chips, analysts said ASE Technology Holding Co (ASE, 日月光投控), the world’s biggest chip packaging and testing service provider, yesterday said it is raising its equipment capital expenditure budget by 10 percent this year to expand leading-edge and advanced packing and testing capacity amid strong artificial intelligence (AI) and high-performance computing chip demand. This is on top of the 40 to 50 percent annual increase in its capital spending budget to more than the US$1.7 billion to announced in February. About half of the equipment capital expenditure would be spent on leading-edge and advanced packaging and testing technology, the company said. ASE is considered by analysts
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Huawei Technologies Co’s (華為) latest smartphones carry a version of the advanced made-in-China processor it revealed last year, results from an independent analysis showed. This underscored the Chinese company’s ability to sustain production of the controversial chip. The Pura 70 series unveiled last week sports the Kirin 9010 processor, research firm TechInsights found during a teardown of the device. This is a newer version of the Kirin 9000s, made by Semiconductor Manufacturing International Corp (SMIC, 中芯) for the Mate 60 Pro, which had alarmed officials in Washington who thought a 7-nanometer chip was beyond China’s capabilities. Huawei has enjoyed a resurgence since
purpose: Tesla’s CEO sought to meet senior Chinese officials to discuss the rollout of its ‘full self-driving’ software in China and approval to transfer data they had collected Tesla Inc CEO Elon Musk arrived in Beijing yesterday on an unannounced visit, where he is expected to meet senior officials to discuss the rollout of "full self-driving" (FSD) software and permission to transfer data overseas, according to a person with knowledge of the matter. Chinese state media reported that he met Premier Li Qiang (李強) in Beijing, during which Li told Musk that Tesla's development in China could be regarded as a successful example of US-China economic and trade cooperation. Musk confirmed his meeting with the premier yesterday with a post on social media platform X. "Honored to meet with Premier Li