What’s driving Treasurys?

Asian stocks felt the brunt of the panic around the coronavirus’s spread, following the decision by Chinese officials to prevent the departure of residents in the city of Wuhan, where the pathogen had originated. Two neighboring Chinese cities have been locked down, too.

Singapore reported its first case of the virus on Thursday, and two cases were reported in Vietnam, according to officials.

Though the risk-off tone was not shared to the same extent by U.S. equities, Treasurys were buoyed by the uptick in demand for haven assets. China’s stock-market benchmark CSI 300 000300, -0.85% index slumped more than 3% on Thursday, while Hong Kong’s Hang Seng index HSI, -0.60% shed 1.5%. The S&P 500 SPX, +0.08% fell at the start of the session, but came off intraday lows to turn positive.

The European Central Bank, as expected, stood pat and left its benchmark deposit rate at negative 0.5% and its main refinancing rate at zero. It did announce a review of its monetary policy framework, following the Federal Reserve’s ongoing review of its policy tools and communications.

Investors were more keyed into the post-meeting news conference where ECB President Christine Lagarde said the risks to growth remain to the downside but was less pronounced as uncertainty around trade waned, a reference to the signing of the phase one U.S.-China trade deal. At the same time, the weak inflation outlook would keep monetary policy highly accommodative for a prolonged time, she said.

Investors observed some economic data in the morning. Weekly jobless claims rose slightly by 6,000 to 211,000 in the seven days ending in Jan. 18.

What did market participants say?

“Increasing concern over the spreading of the Chinese virus continues to impact markets with equities down over 3% in [China] overnight. The U.S. Treasury market is firm on the move lower in risk assets,” wrote Gregory Faranello, head of U.S. rates at AmeriVet Securities.

“In the end this will take more time to play out, and unfortunately has a feeling of getting worse before it gets better. It is always difficult to ascertain the exact economic impact, but for now the markets remain in defense mode with China already trying to emerge from their economic slowdown and tariff war,” he said.