European yields fall as investors scramble for safety

April 1, 2020: Euro zone bond yields fell on Wednesday, with investors rushing into safe-haven government debt as the continuing spread of the novel coronavirus fed risk-off sentiment.

More than 74,000 new cases were reported globally on Tuesday, the largest increase in a single day since the virus began and almost 30% above the previous day's rise.

There are now over 850,000 cases and 42,000 deaths across 205 countries and territories, according to a Reuters tally at 0200 GMT on Wednesday. Italy and the United States have reported a total of more than 100,000 cases each.

Germany's Bund yield was down 4.7 basis points at -0.504% . Most of the rest of the core euro area market also saw declines, with France and Belgium seeing rates steady.

Lyn Graham-Taylor, fixed income strategist at Rabobank, said there was a strong risk-off mood across the financial markets on Wednesday.

The market can't "look around the corner" for a significant improvement in the euro zone economy given the recently published weak data and the lack of positive news in regards to the coronavirus, he said.

Data on Wednesday showed euro zone manufacturing activity collapsed last month as breaks in global supply chains caused by measures to curb the coronavirus pandemic crushed output.

The nosedive could worsen in coming months, a survey showed on Wednesday.

Elsewhere, Portugal launched the sale of a 7-year bond via a syndicate of banks, reflecting widespread sentiment in Europe that national treasurers are under pressure to finance huge government rescue programs to fight the economic fallout from the spread of COVID-19.

"I've heard rumours the books are going to be really big," Rabobank's Graham-Taylor said, adding that "it wouldn't be a surprise" if the number was much bigger than that of the 2015 issue, when books topped 3 billion euros ($3.3 billion).

Spain was the first euro zone member country to tap the primary market with a 7-year bond last week. Belgium also priced a 7-year bond on Tuesday.

Unicredit analysts said the 7-year maturity segment appears to be meeting with strong demand from financial institutions.

Portugal's 10-year government bond yield was last up 1.7 bps to 0.852%, a six-day high. ($1 = 0.9128 euros)

 Reuters