Markets reel as China devalues a second time

Stocks, the dollar, and emerging market currencies around the world remained under pressure for a second day yesterday after China devalued its currency again, boosting the appeal of top-rated government bonds.

Germany’s two-year yield fell to a new record low of minus 0.29% as investors feared the deflationary pressures of a slowdown in China’s economy would sap growth globally.

The prospect of a US interest rate rise by the Federal Reserve next month dimmed as a result, dragging the US dollar, financial stocks and US Treasury yields lower. The 10-year US Treasury yield fell to 2.045%, the lowest in more than three months. “China is still a big unknown, and the market is pricing in the worst,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York.