Question

Question What are the implications of the coronavirus pandemic on the bond markets over the world? Discuss the behavior of investors in these markets and the expectations of technical analysts for the bond markets in the near future.

Answer 1

Bonds are considered fixed income and relatively less volatile hence when the market is facing a lot of turbulence people choose to shift from volatile assets like equities to fixed income instruments like bonds. Because the widespread of the effect of this disease the market has been going up and down significantly and the volatility has increased significantly in the market. The market has lost and in the coming few months or at least few month the volatility is going to be there so some investors would be shifting their portfolio from equities to fixed income securities like bond so the investment in bonds will increase and yield will probably decrease because the rise in the demand of bond. Investors will be looking for high credit rating bonds which can provide their investment a safe return. The investors are wary of the spread of the disease and with the US China trade war already affecting the market, this large spread of disease came as an additional shock to the market where the market demand for bond will rise as more investors will choose to protect the erosion of their portfolio, given that scenario, there is high probability that the bond yield will fall.