Bonds Europe: the market is stabilizing, still monitoring the coronavirus

Lending rates were little changed on Tuesday in the eurozone, although investors remained concerned about the coronavirus epidemic, the economic consequences of which are becoming more and more sensitive.

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“Rates remain the safe haven in a market that is still a little worried even if the equity indices are still holding up very well,” Jean-François Robin, bond strategist at Natixis, noted with AFP.

“There is also a kind of catching up with the Japanese figures which were nevertheless a signal that there would be real impacts (of this health crisis) on the more advanced economies”, he added.

“The slowdown is still going to be pretty big,” he said, as evidenced by Apple’s earnings warning on Monday.

Japan suffered the worst fall in 5 years of its gross domestic product (GDP) in the 4th quarter of 2019, weighed down by an increase in the very unpopular consumption tax.

A recession (two consecutive quarters of decline) appears likely due to the negative effects, which are still difficult to measure, of the epidemic of the new form of viral pneumonia originating in China, of which Japan is currently the second focus.

The toll of the epidemic reached Tuesday nearly 1,900 dead while the number of contaminations in China has exceeded the milestone of 72,300 people. Elsewhere in the world, around 900 infected people have been identified in nearly 30 countries.

But the World Health Organization is reassuring: outside of central Hubei province, the epicenter of the epidemic, the disease “affects a very small proportion of the population”, with a mortality rate of around 2%.

In mainland China, the number of new contaminations in 24 hours (1,886) was also the lowest since the beginning of the month and that of additional deaths (98) fell for the fourth consecutive day.

Good American indicators

“The session is not very consistent” because even if rates fall at the margin, “the currencies are holding up well” and the equity markets show only a slight decline, noted Mr. Robin.

We still have the impression that, once again, we are touching up a plateau and that at one point or another, the equity markets may again buy the idea that the worst is behind us, “continued Mr. Robin.

In addition, “the American figures are good, in particular the Empire State twice better than expected”, therefore “the United States is not for the moment not at all affected” as for the confidence figures, did he adds.

The growth of manufacturing activity in the New York region accelerated sharply in February, surpassing analysts’ expectations, according to the Empire State monthly index released on Tuesday.

At 6:00 p.m. (5:00 p.m. GMT), Germany’s 10-year borrowing rate ended in slight decline, at -0.41% against -0.40% Monday at the close of the secondary market, where the debt already issued.

That of France ended unchanged, at -0.17% like the previous day, just like that of Spain, which stabilized at 0.28%, while that of Italy slightly increased , at 0.93% against 0.90%.

The UK’s 10-year interest rate fell to 0.61% from 0.64%.

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