Bonds rise at prices of three months ago due to fear of contagion

Fear of the impact that the spread of the new coronavirus can have is having an effect on fixed income markets. On Monday, all the main references in Europe that Bloomberg collects received strong purchases, reflecting a flight to lower risk assets by investors.

German 10-year debt fell in profitability 4.7 basis points, to -0.38%, November minimums. The French bond fell 5.3 basis points in profitability, to -0.12%, and the Spanish 6.6 basis points, returning to 0.28% that had not been seen since last November.

The 10-year bonds in Italy and Greece led price increases, with declines in profitability of 18.5 and 13 basis points, respectively, to 1.04 and 1.17%. Both also quoted other news, such as the results of the elections in Italy and an improvement in qualification for Greece by Fitch, who now considers her BB with a positive outlook.

“Wuhan's closure for a long epidemic would have a strong impact on the Chinese economy,” according to Ostrum AM

Experts confirm that market reactions are based on a real fear that the spread of the virus will end up affecting economic growth. From Ostrum AM, Philippe Waecheter, director of economic research of the manager, highlights how “the closure of Wuhan by a long epidemic would have a strong impact on the Chinese economy, and would result in a weaker growth in 2020“The expert believes that the main source of short-term weakness will come from retail sales.

From Axa Investment Managers, Gilles Moëc, chief economist of the firm, believes that, although it is still too early to quantify the economic impact of the coronavirus, this is now a threat that could “provide a abrupt end to what was expected to be a simple walk “for the world economy in 2020.