Bond yields in the United States have been drastically falling, with the 10-year Treasury note dropping to a new record low. It comes on the back of the growing coronavirus concerns that are spooking the markets.
More than 80,000 confirmed cases of COVID-19 have been confirmed, the vast majority in China. The disease has killed 3,000 deaths people, including at least 2,600 in China, according to the World Health Organization.
Investors are frantically seeking safe-haven assets, with bonds, of course, being the safest of safe havens, a fixed-income instrument. Given the incredibly high demand for them, the bond yields are being driven south.
Market participants have fled equities for the safety of U.S. debt all week amid mounting concerns about the disease’s effect on global manufacturing, exports and consumption. Saudi Arabia has suspended the entry of foreigners for pilgrimage and tourism purposes, while a Japanese woman has become the first person to contract the virus for a second time.
What are bond yields?
Bond yields, in a nutshell, are the percentage return that an investor will be paid for investing in that particular bond. Yields will be forced lower if there is a high amount of demand for the bond. On the other hand, if markets are typically in great spirits and sentiment is good, bond yields will typically rise.
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