German bonds go negative for first time as investors panic over surge in support for Brexit

• Investors looking for safe havens to park their cash as interest rates low
• Money pushed into German government bonds has caused price to rise 
• Now the secure bonds are costing investors as they don't pay money back

By Matt Hunter For Mailonline

The price of rock-solid German government bonds has rocketed over fears of a possible Brexit.

Interest rates have fallen to record lows meaning investors are looking for safe havens to park their cash. 

As investors flock to place money in German government 10-year bonds their price has risen 

The bonds, which are considered a benchmark of financial security, known as Bunds, are now not paying any money back because demand is too high. 

Today the Bund yielded minus 0.028 percent - meaning it was costing anyone who held the investment. 

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As investors flock to place money in German government 10-year bonds their price has risen (German parliament pictured)

Ditching any hope of a return on their investment now seems a reasonable price to pay to escape the uncertainties of falling stock markets or volatile commodities and currencies.

The factors driving the current rally in Bund prices are concerns about the global economy, rock-bottom inflation in the Eurozone and fears about a possible Brexit.

Polling for weeks has placed the Leave campaign ahead of the Remain side with the British referendum now little more than a week away.

DeKaBank economist Ulrich Kater said: 'A huge driving factor behind the current price trend is the heightened uncertainty over a possible Brexit, which is driving investors into the safe haven of German sovereign bonds.'

Interest rates on sovereign debt have been low for some time as central banks snap up government bonds from investors in an effort to boost economic growth.

Be it in Japan, the United States, Switzerland or Britain, the rate of return for sovereign bonds of most major industrialised nations are striking new record lows in day-to-day trading.

German chancellor Angela Merkel 

'The drop in yields below the zero mark once again shows the immense challenges currently facing global financial markets,' Kater said.

'Weak growth is pulling down inflation expectations even further. Central banks are trying to counter falling inflation expectations using aggressive monetary policy,' he said.

The European Central Bank has slashed its key interest rates to zero and launched a massive bond-buying programme known as quantitative easing (QE) in a bid to get the eurozone economy back on its feet and push inflation higher.

LBBW analyst Werner Bader said: 'Fears that Britain will quit the EU has killed off any willingness to take risks in European capital markets.'

'Risk aversion and scarcity remain the key driving forces for market activities and valuations.'

Germany's own finances have benefitted from its safe-haven status in recent years, because with investors favouring national sovereign debt, borrowing rates in Europe's biggest economy have come down.

The government has seen its annual interest payments fall from more than 40 billion euros ($45 billion) per year in 2008 to 21 billion euros in 2015.

The reduced debt servicing costs enabled Germany to balance its budget in 2014 for the first time since 1969 and a year ahead of target.

The finance ministry declined to comment on the drop in Bund yields today. 

A spokesman for the German national financial agency said the drop to negative yields should not be seen in terms of either good or bad.

'The government's debt management is done on a long-term perspective. The current level of yields is of secondary importance,' he said.

'The main aim is to reach a sustainable balance between costs and reliability of planning.'

But from the taxpayers' point of view, 'negative yields are certainly pleasing because they reduce interest payments in the federal budget.'