Australia Joins Global Bond Rally With Record-Low Yield in Sight

(Bloomberg) -- Bond traders in Australia were greeted by the biggest rally in more than three years as markets reopened after the long weekend.

The 10-year yield sank as much as 14 basis points to 0.95% as bonds played catch-up to Monday’s surge in global debt on mounting concern about the coronavirus. The yield now sits just above a record low of 0.85% set in October.

Worries about the financial and human impact of the virus are gripping investors worldwide, with the death toll from the infection in China climbing to at least 100. Commonwealth Bank of Australia predicts the Aussie yield to reach the record low again in coming months.

“There are fears that the coronavirus will significantly impact tourism numbers for Australia on top of the impact from recent bushfires,” said Martin Whetton, CBA’s head of bond and rates strategy in Sydney. “U.S. yields are reacting to the threat of a slowdown in global trade and travel but also to the way this has manifested itself -- lower equity markets.”

The 10-year Treasury yield slid eight basis points to a more than three-month low amid Monday’s flight to safety. It was down one basis point at 1.60% on Tuesday.

It’s not the first time that Australia’s bonds have been taken for a ride due to concerns over an epidemic. The 10-year yield had slipped over 40 basis points between mid-November 2002 and early March 2003 on account of the Severe Acute Respiratory Syndrome outbreak, before staging a sharp rebound.

To contact the reporter on this story: Stephen Spratt in Hong Kong at sspratt3@bloomberg.net

To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net, Shikhar Balwani, Brett Miller

©2020 Bloomberg L.P.