As a result of the tumultuous start to the year, investors have been increasingly retreating to bastions like gold, Yen, and Swiss Francs. Gold prices have risen nearly 17 percent so far this year (see below). The Yen has appreciated more than six percent against the dollar during the past week, while the Swiss franc strengthened two and a third percent against the greenback.
Internationally, an increasing share (now 30%) of all government debt offers negative interest rates (the New York Times ran a fantastic piece on negative interest rates). This week, Japanese government bonds were in the news as the yield on the ten-year JGB fell into negative territory. This suggests expectations of prolonged low or negative interest rates. U.S. Federal Reserve Chair Yellen said that U.S. officials are looking into the option of negative interest rates. The yield on a ten-year U.S. treasury bond fell to 1.63 percent on Thursday. The spread between this ten year government bond and a high-yield corporate bond has climbed to its highest level since the financial crisis (see below).
Market volatility, as measured by the CBOE VIX, closed above 25 all week, ending the week at 25.04. Oil prices fell further during the week, with the benchmark U.S. measure, front month contracts for West Texas Intermediate crude, closing Friday at USD29.44 per barrel. On Thursday, the price per barrel hit a twelve year low of $26.05 (see below).