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Stampede to safety sends UK yields near zero as coronavirus spreads

By Andy Bruce

By Andy Bruce LONDON, March 6 (Reuters) - British government bond yields plunged on Friday to all-time lows and approached zero, even for medium-dated gilts, as investors stampeded into safe-haven assets to escape the economic impact of the spread of coronavirus. With global stock markets tanking, speculation mounted that central banks around the world would be forced to join the U.S. Federal Reserve and Bank of Canada in cutting interest rates. Like its U.S. Treasury equivalent, the benchmark 10-year British gilt yield hit a new record low, falling as low as 0.209%, down more than 11 basis points on the day and putting it on track for its biggest weekly drop in five years. Twenty- and 30-year gilt yields also fell to new record lows at 0.582% and 0.687%. More than a third of conventional gilts now yield less than 0.2%, raising the prospect that a big chunk of the British yield curve could turn negative within days. Although yields for a few short-dated gilts briefly fell below zero in the weeks after the 2016 Brexit referendum, the prospect of such a broad-based decline into negative territory would be unprecedented for British government debt. The escalating crisis has raised questions about how quickly major economies can recover from the outbreak. "The risk here is that, with multiple epicentres in a highly interconnected global economy, the peak does not look like a 'V'-shaped recovery, setting this pandemic apart from past episodes that further delays a future return to normality," Lena Komileva, chief economist of consultancy G+ Economics said. June long gilt future 138.05 (+1.41) June 2020 short sterling 99.57 (-0.03) Dec 2020 short sterling 99.61 (-0.025) 10-year gilt yield 0.22 (-11.8 bps) -------------------KEY MARKET DATA--------------------------- Long Gilt futures Gilt benchmark chain Short Stg futures Cash market quotes Deposit rates Sterling cross rates UK debt speedguide -------------------KEY MARKET REPORTS-------------------------- Gilts Sterling Euro Debt Dollar U.S. Treasuries Debt reports --------------------GILT STRIPS DATA ------------------------- Gilt strips data All gilt strips Gilt strips IO Gilt strips PO