U.S. Treasury yields slipped on Tuesday on fears the rapidly spreading coronoavirus in China would affect economic growth after the U.S. reported its first case of the respiratory virus, sending investors into the safety of haven assets.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, -3.02% slipped 6.6 basis points to a six-week low of 1.768%. The 2-year note rate TMUBMUSD02Y, -2.88% was down 3.9 basis points to 1.530%. The 30-year bond yield TMUBMUSD30Y, -2.37% retreated 6.5 basis points to a five-week low of 2.230%. All three maturities marked their largest single-day drop since Jan. 3.
What’s driving Treasurys?
Worries about the coronavirus added to concerns in equities, but mostly in Asia. Reports say around six people have died from the new respiratory virus so far and Chinese health experts have confirmed that it could be transmitted between humans. Investors said fears that the coronavirus could turn into a pandemic like SARS which killed about 800 people in Asia in 2003 and could stir up demand for havens like government paper.
The U.S. Centers for Disease Control and Prevention said Tuesday that a single case of the coronavirus has been diagnosed in the U.S.
Shares in Hong Kong took a severe hit after Moody’s downgraded the financial center’s credit rating by one notch to Aa3 on Monday due to concerns that the city’s officials were unable to handle the issues that sparked months of violent protests. Fitch had cut Hong Kong’s rating earlier in September.
What do market participants’ say?
“The focus on coronavirus and its parallels with SARS has conjured concern around the last time a severe epidemic had a meaningful impact on Asian (and potentially global) economic activity. While the direct influence of the outbreak on domestic growth is questionable at best, the spillover into local markets and the accompanying contagion risk added a bullish tilt to trading in [Treasurys] on Tuesday,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.