Eurozone bond yields fall on a major variant of Covid

Eurozone government bond yields fell sharply across the board on Friday morning as investors responded to the spread of a newly identified variant of the coronavirus in South Africa by piling on safe haven assets.

The new variant was considered by scientists to be the most important to date, Britain said on Friday, adding that authorities need to determine whether it makes the vaccines ineffective or not.

“Concerns about a new variant of Covid that could be significantly more resistant to current vaccines due to a significantly altered spike protein have led to a significant increase in risk aversion in the markets,” BayernLB analysts said in a note.

Safe havens, such as government bonds, the Japanese yen, the Swiss franc, US Treasuries and gold are in demand, while Asian and European stock markets have posted significant losses, noted the analysts.

“The remainder of the negotiating day will now be determined by further information flows on the new variant, including an emergency meeting of the World Health Organization,” he added.

The yield on German 10-year government bonds, the benchmark for the eurozone, fell 7 basis points to -0.32% at the opening. Other well-rated eurozone government bond yields were 5 to 6 basis points lower.

US Treasury yields slipped about 10bp on the curve.

– Reuters

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