Virus: Eurozone bond yields steady on hopes over outbreak numbers

Eurozone finance ministers have said they would be ready to spend more if a downturn hits its economy. Picture: Getty Images

Eurozone government bond yields stabilised as investors welcomed signs that the spread of the coronavirus in China was slowing and that more economic stimulus to offset the fallout could be on its way.

Investors are concerned about how the outbreak will impact supply chains in the world’s second-biggest economy and what effect it will have on inflation and monetary policy. Germany’s 10-year benchmark yield initially fell to -0.42%, near a two-week low of -0.43%.

The rest of the eurozone market followed suit before yields recovered as sentiment across asset classes improved. The yield on the Irish 10-year bond traded at -0.13%. Still, analysts say many yields are struggling for direction. “We hear from our clients that they are not buying right now because they are waiting for a better pick up in yield,” said Rene Albrecht, a rates strategist at DZ Bank in Frankfurt. “Everyone in the market is looking for direction.”

Chinese policymakers have implemented a raft of measures to support an economy sharply affected by the outbreak, which is expected to erode first-quarter growth.

Europe relies heavily on Chinese economic growth. Firms in China’s virus epicentre of Hubei will not have to pay pensions and benefits until June. Germany’s finance minister and his counterparts in the eurozone have said they would be ready to spend more if a downturn hits its economy.

Reuters and Irish Examiner