German bond yields most negative in two weeks on coronavirus caution

• The statement provided the latest warning on the extent to which the outbreak will impact the global economy, sending stock markets down.
• Germany's 10-year benchmark yield was last down 3 basis points to -0.43pc, its lowest in two weeks.

LONDON: Safe-haven German bond yields hit their most negative level in two weeks on Tuesday as a trading update from Apple spooked markets across the globe on the economic impact of coronavirus.

The world's most valuable technology firm warned on Monday it was unlikely to meet its March quarter sales guidance set just three weeks ago, as it became one of the biggest corporate casualties of the virus outbreak.

The statement provided the latest warning on the extent to which the outbreak will impact the global economy, sending stock markets down.

"Apple's announcement makes the wider virus impact more tangible and we expect more fixed-income buying flows, especially if this is backed up by negativity in earnings from Walmart and Deere & Co," Mizuho analysts said in a note to clients, referring to major upcoming company results statements.

The change in market tone follows monetary measures taken by China to curb the impact of the virus on Monday, which had stoked some optimism on policymakers' response.

Germany's 10-year benchmark yield was last down 3 basis points to -0.43pc, its lowest in two weeks. Other 10-year bond yields  fell similarly.

Investors will focus on the ZEW economic sentiment surveys due out of Germany and the euro zone at 1000 GMT.

The German readings are expected to show falling optimism, according to a Reuters poll.

The data releases come after last week's GDP reading which showed the German economy stagnated in the fourth quarter, as the coronavirus outbreak has fuelled concerns about the region's growth outlook.

"A larger slump [in the ZEW survey] should be averted as the relevant question asks analysts about their macro (economic) expectations in six months - where the consensus and equity markets seem to agree that the worst should be over," Commerzbank analysts said in a client note.

In the primary market, Germany is due to sell 5 billion euros ($5.4 billion) of two-year bonds, while Belgium has started selling a syndicated 20-year bond via a syndicate of banks.

Elsewhere, a document is expected to be published by euro zone finance ministers on Tuesday that will recommend increasing spending in the event of a downturn.