U.S. Treasury yields were on the slide in early Tuesday trade as fears around a rapidly spreading virus in Asia along with a credit rating downgrade for Hong Kong, the region’s premier financial center, drove investors into haven assets.
What are Treasurys doing?
The 10-year Treasury note yield TMUBMUSD10Y, -1.49% slipped 3.5 basis points to 1.800%, while the 2-year note rate TMUBMUSD02Y, -1.06% was down 2.2 basis points to 1.547%. The 30-year bond yield TMUBMUSD30Y, -1.08% retreated 3.9 basis points to 2.257%.
What’s driving Treasurys?
Shares in Hong Kong and in global stock markets took a hit after Moody’s downgraded the financial center’s credit rating by one notch to Aa3 on Monday due to concerns that the city’s officials were unable to handle the issues that sparked months of violent protests. Fitch had cut Hong Kong’s rating earlier in September.
Worries around the coronavirus added to concerns in Asian equity markets. Reports say around six people have died from the new respiratory virus so far and Chinese health experts have confirmed that it could be transmitted between humans.
China’s CSI 300 index 000300, -1.71% closed 1.7% lower on Tuesday, leaving it with a meager gain of 0.4% for the year. The Hang Seng stock-market benchmark HSI, -2.81% slumped 2.8%, FactSet data show.
The risk-off mood spilled over into U.S. stocks, too. The S&P 500 SPX, +0.39% index and the Dow Jones Industrial Average DJIA, +0.17% indicated a lower open for Wall Street.
Central banks will also stay in focus as investors have cited easy financial conditions across the world for supporting risk assets this year. Japanese and Canadian monetary policymakers are set to hold meetings this week.
See: Asia markets slide as concerns over coronavirus take hold
Read: Human-to-human coronavirus transmission confirmed with China in heavy-travel Lunar New Year period
What do market participants’ say?
“Coronavirus concerns and yesterday’s Hong Kong rating downgrade (Moody’s Aa2 to Aa3 stable) have taken the wind out of the equity markets’ sails this morning with the Hang Seng the weakest of the major indices,” wrote Kit Juckes, macro strategist for Société Générale.
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