German 2-year bond yield turns negative Germany's two-year bond yield turned negative for the first time, and Berlin's 30-year borrowing costs fell below those of Japan, as investors sought shelter in Europe's safest assets over concern that policy makers were unable or unwilling to stem the region's debt crisis. The 10-year benchmark bond yields of the UK and the Netherlands fell below 1.5 per cent, and Denmark's comparable bond yield fell under 1 per cent, even as the eurozone periphery bond yields edged up again, underscoring the "flight to safety." UK gilts, German Bunds and US Treasuries have been the main beneficiary, with yields continually dropping to new lows in recent weeks. The UK can now borrow for up to 30 years at below 3 per cent, and Germany comfortably under 2 per cent. "The . . . crisis appears to have worsened," Mark Schofield, global head of rates strategy at Citigroup, said in a note. Rapidly rising tier-two yields and widening spreads to the soft core as well as to Germany could, if unchecked, take [the eurozone] to the point of no return. The eurozone's manufacturing purchasing managers' index for May fell to 45.1 in May, the lowest since mid-2009 according to Markit, adding to the gloomy outlook for Europe's economy. At the current level, the manufacturing sub-index of the PMI indicates a "massive" 0.5 per cent contraction in economic activity in the second quarter, Annalisa Piazza, a strategist at Newedge, said in a note. "Part of the recent sharp decline in business confidence indicators might be attributed to "panic" reaction due to the current financial market crisis," she said. However, falling business confidence is also the sign that activity has lost further momentum as companies are more cautious in their investment plans and households are hit by lower disposable income. Divyang Shah, global strategist at IFR Markets, said the uncertainty surrounding the eurozone's future was propelling investors into the safest assets such as German Bunds, but said liquidity in this market could now be an issue Are there enough sellers of Bunds to meet demand? There's no depth in the market," he said. There is too much money leaving the periphery and everyone is piling into a narrow band. He said the focus on havens had become even more noticeable because investors that had previously escaped risk in troubled developed markets by turning to India, China or Brazil in times of stress, were now exiting those emerging markets and also focusing on gilts, Bunds and Treasuries.