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

Concerns over the global spread of the new coronavirus has also driven investors to bid up bond prices, resulting in yields in major economies to inch lower. U.S. Treasurys, which are backed by the American government, are considered safe haven assets that investors tend to flee to in times of market volatility and uncertainty.

Yields on all of the U.S. Treasury contracts fell below 1% in the past week — a development not seen before. The benchmark 10-year contract also touched its historic low of around 0.3%.Such compression in U.S. Treasury yields could prompt the Federal Reserve to cut interest rates once again, several analysts said. The U.S. central bank made an emergency cut of 50 basis points last week, bringing its target funds rate to 1% to 1.25%.

Government bond yields inch lower Chart shows the movements in 10-year government bond yields of major economies —U.S. U.K. -China — Japan 3.5% 3.0% > 2.67% 2.5% Chinese markets closed for Lunar New Year Yields 2.0% 1.5% 1.0% 0.75% 0.5% 0.24% 0.0% -0.04% -0.5% 2-Jan 12-Jan 22-Jan SOURCE: Refinitiv (Data as of March 10) 1-Feb 11-Feb 21-Feb 2-Mar t he