As the week rolls on, investors have rushed into safe-haven US Treasuries, with 10-year yields falling from Tuesday January 28 to their lowest since early October.
The gap between yields on three-month notes and 10-year government bonds briefly fell to its lowest since October, before returning to mean.
Analysts are saying that the movement in the curve is most likely signalling a shift away from risk assets to safe assets, including Treasuries, with the entire curve being pulled down.
The appetite for safe assets has been triggered by the death toll from the coronavirus outbreak in China.
The casualty rate is now nearing 180 and the virus has spread to more than 10 countries, inclusive of France, Japan and the United States.
The crisis continues to impact world markets. Investors in turn have rushed into safe-haven US Treasuries.
Markets are starting to speculate the Federal Reserve could bring rates down by summer. The three-month/10-year part of the yield curve is closely watched as signal of pending recession indicator.
The markets in the West have settled somewhat in response to new earnings reports coming out this week. Mid-week contracts on most major US indices rebounded above uptrend lines since the Oct.
However in Asia the story is yet to change. Japan’s Nikkei 225 (-0.55%) fell for the second day, while South Korea’s KOSPI (-3.09%) underperformed.
The increasing demand for Treasuries, boosted the dollar index. The Japanese yen was flat and remain unchanged, unable to get through the $1,600 ceiling.
Bitcoin, meanwhile has been climbing.
Oil fell as low as US$52.16 yesterday midweek, the lowest since August 2019.