Australian bonds jump on safe-haven demand following outbreak of Wuhan coronavirus

The Australian bonds jumped during Asian session Wednesday as investors crowded towards safe-haven assets following the outbreak of deadly Wuhan coronavirus in China that claimed lives of few, affecting more than 200 people ahead of the Lunar New Year holiday, with millions of tourists expected to visit the country.

The yield on Australia’s benchmark 10-year note, which moves inversely to its price, slumped nearly 4-1/2 basis points to 1.117 percent, the yield on the long-term 30-year bond plunged 5 basis points to 1.729 percent and the yield on short-term 2-year lost nearly 3-1/2 basis points to trade at 0.727 percent by 03:15GMT.

As the number of cases and geographical spread (with the first case in US confirmed) of the Wuhan coronavirus increase, this could potentially pose a dark cloud to the nascent green shoots theme, leading to rising concerns that the January market rally may not be able to sustain, OCBC Treasury Research reported.

With the dampened global risk appetite, Wall Street declined overnight, and UST bonds rallied with the 10-year yield falling to 1.77 percent.

While US president Trump is hopeful of a “tremendous new deal” with the UK and “we’re going to talk about a big trade deal” with the EU, and Treasury Secretary Mnuchin suggested US growth could beat forecast this year, Chinese Vice Premier Han Zheng told WEF audience that China will open its door wider and downplayed concerns that the Phase 1 deal will be at the expense of other nations, the report added.

Meanwhile, the S&P/ASX 200 index traded nearly 1 percent higher at 7,071.50 by 03:20GMT.