January 21, 2020 / 8:28 AM / a month ago

German government bond yield hits one-week low after coronavirus worries

* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr

By Yoruk Bahceli

LONDON, Jan 21 (Reuters) - Germany’s 10-year government bond yield touched one-week lows on Tuesday as worries around a new virus in China pushed investors into a broadly risk-off mood.

China reported a fourth death from the coronavirus on Tuesday as the number of cases continued to rise, sending jitters through Asian markets as hundreds of millions of Chinese prepared to travel for the Lunar New Year holiday.

Health authorities around the world stepped up screening and the World Health Organization called a meeting on Wednesday to consider declaring an international health emergency, as China confirmed the virus spread through human contact.

“This morning the market started with a rather risk-off mood because of the coronavirus issue,” said DZ Bank rates strategist Sebastian Fellechner, citing government bond markets in Australia and Japan.

Germany’s 10-year government bond yield hit a one-week trough in early trading, falling as low as -0.23%. It was last down 1 basis point at -0.22%. Most other 10-year euro zone yields were one basis point lower.

The next focus for investors will be the ZEW economic sentiment surveys for Germany and the euro zone, due at 1000 GMT.

A Reuters poll expects the headline survey for Germany to rise to 15 from 10.7, while a separate gauge of investors’ assessment of current economic conditions is expected to improve to -13.5 from December’s -19.9.

The surveys follow a pick-up in data releases in recent weeks, which has prompted economists to conclude that euro zone economic activity has probably bottomed out.

“The survey has been taken in a period where we had the dispute between the U.S. and Iran but also the deal between China and the U.S... This could be the game-changer,” DZ Bank’s Fellechner said.

He said the survey could trigger a rise in yields as optimism on the Phase 1 U.S.-China trade deal would be more important to investors than tensions between Washington and Tehran. (Reporting by Yoruk Bahceli; editing by John Stonestreet)

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