As rates tightened in Italy and Spain, Germany’s 10-year borrowing rate fell to -0.54% from -0.51% on Wednesday evening.
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German and US borrowing rates continued to decline on Thursday as the rapid spread of the coronavirus epidemic beyond China prompted investors to seek refuge in the debt market .
We are in “a persistent climate of risk aversion today,” said Eric Bourguignon, member of the Executive Board of Swiss Life AM France, to AFP.
This benefits government bonds, first at the German ten-year rate, or Bund, which refers, and the US ten-year rate, which signed a new historic low on Thursday, at 1.24%.
Not only “the virus continues to spread, especially outside of China and perhaps even faster outside”, but “more and more problems of disruption in production chains are manifesting,” he said. he completed.
Finally, “on the demand side, in this context of concern, of chain breakdown and therefore of drop in production, there is less demand, both on the business and consumer side, therefore the fear of a strong economic impact of this crisis is taking shape, ”said Mr. Bourguignon.
The number of new daily cases of Covid-19 reported outside of Chinese territory now exceeds those in China, where the virus appeared in December, according to the World Health Organization (WHO).
Saudi Arabia suspended the entry of pilgrims to Mecca and the virus landed in Latin America, which had not yet been affected by the epidemic, entering it through Brazil.
Pakistan also announced its first two cases on Wednesday. In Europe, Austria, Switzerland, Norway, Romania, Croatia, North Macedonia, Greece, Spain and Denmark are now affected in addition to Italy, France and Germany.
In Iran, the death toll rose to 19 people and 139 cases, the heaviest in terms of death outside China, while with more than 400 cases and 12 deaths, Italy is the most affected country in Europe.
The fact remains that “it is rather the equity markets which are suffering because the rates had taken the lead, anticipating a somewhat unfortunate scenario”, noted Mr. Bourguignon.
Spread of peripheral debts
It should also be noted that “all peripheral debts (the debts of the less solid countries of the euro zone, note) deviate from Germany, they do not accompany Germany in its rate cut” , he added.
Henceforth “peripheral debts, in particular those of southern Europe, are joining the camp of risky workers who are suffering in the current environment”, according to Mr. Bourguignon.
At 6:00 p.m. (5:00 p.m. GMT), Germany’s 10-year borrowing rate fell to -0.54% from -0.51% on Wednesday at the close of the secondary market, where the already issued debt is traded. This is a low since October 2019.
That of France fell to -0.26% against -0.24% while that of Italy rose to 1.07% against 0.99%, the highest since the end of January, as well as that of Spain, at 0.30% against 0.24%.
The UK’s 10-year interest rate fell to 0.47% from 0.50%.
In the United States, the ten-year borrowing rate sank even more at 1.30% against 1.34% on Wednesday, like that at 30 years, at 1.79% against 1.82% . The one at two years stood at 1.10%, against 1.16%.
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