Euro zone bond yields drop on significant COVID variant

Safe havens, such as government bonds, the Japanese Yen, the Swiss Franc, U.S. Treasuries and gold are in demand, while Asian and European equity markets have recorded significant losses, the analysts noted. "The rest of the trading day will now be determined by further newsflow on the new variant, including an emergency meeting of the WHO," the added.

Euro zone government bond yields dropped sharply across the board on Friday morning as investors reacted to a newly-identified coronavirus variant spreading in South Africa by piling into safe haven assets. The new variant was considered by scientists to be the most significant yet found, Britain said on Friday, adding that authorities needed to ascertain whether or not it made vaccines ineffective.

"Concerns about a new COVID variant that could be significantly more resistant to current vaccines due to a significantly altered spike protein have caused risk aversion to rise significantly in the markets," analysts at BayernLB said in a note. Safe havens, such as government bonds, the Japanese Yen, the Swiss Franc, U.S. Treasuries and gold are in demand, while Asian and European equity markets have recorded significant losses, the analysts noted.

"The rest of the trading day will now be determined by further newsflow on the new variant, including an emergency meeting of the WHO," the added. Germany's 10-year government bond yield, the benchmark for the bloc, was down 7 bps at -0.32% at the open. Other highly-rated euro zone government bond yields were lower 5-6 bps.

U.S. Treasury yields slipped around 10 bps across the curve.

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