Bond yields tumbled to record lows from London to Sydney, reflecting a volatile mix of fear over the coronavirus fallout and rush for higher returns after Treasuries entered uncharted territory.

Yields for short-term debt in Australia and South Korea dropped almost 10 basis points on bets for more policy easing. Indonesian and Indian bonds, Asia’s high yielders, also saw double-digit rate declines as a wider differential with Treasuries increased their attraction.

The rally extended into Europe with U.K. 10-year yields dropping to a record low on bets the Bank of England will follow the Federal Reserve and cut interest rates this month. Canadian bonds also gained amid expectations that the Bank of Canada will loosen policy later Wednesday.

“Everybody expects more from the Fed even in the very near term,” said Adam Kurpiel, head of rates strategy at Societe Generale SA. “There is room for bonds to perform even more. I will not go short for now on all core bonds, that’s for sure.”

Italian and Greek debt led gains in the euro-area as money markets also raised bets on looser policy from the European Central Bank. Yields on core European bonds may not have much further to fall but those on peripheral debt definitely do, said Jens Peter Sorensen, chief analyst at Danske Bank A/S in Copenhagen.

“If the ECB does something then I do not think it is going to be a rate cut but more an escalation of QE and some liquidity measure aimed at supporting banks and companies,” he said, adding this is more likely to benefit countries such as Italy.

With 10-year U.S. Treasury yields slipping below 1% for the first time, and a continued slide expected, a rout in Asia’s emerging-market debt screeched to a rude stop. Indonesia, which last month saw its worst bond outflow since 2011, was the best example of a sudden pivot even if doubts persist.

“We are in an uncharted territory where U.S. yields are at an all-time low, and dragging EM Asia yields along,” said Edward Ng, a money manager at Nikko Asset Management Asia Ltd. “While the levels are tempting for investors to fade the move, the timing isn’t the most assuring given that there is still much uncertainty over the extent of the virus outbreak in the rest of the world.”

For now, the Fed’s emergency cut is pumping dollar liquidity into the market, emboldening some funds to take a bet on emerging-market assets.

Inflation-adjusted 10-year yields across 23 emerging markets averaged 0.69% at the end of February, according to data compiled by Bloomberg. That gave them a 188 basis points advantage over developed markets, many of which are mired deeply in negative real rates.

Easing Bets
Central banks in Australia and Malaysia cut rates on Tuesday ahead of the Fed, and speculation is rife that the Bank of Korea will follow suit after its governor held an emergency meeting with officials. The Reserve Bank of India also said there’s room to ease as the nation reports its first cases.

Korea's 3-year yield falls below central bank's policy rate amid easing speculation
Overnight index swaps are priced for the Reserve Bank of Australia to lower rates by another 25 basis points in April. Money markets indicate about an 80% chance of a 50-basis-point cut by New Zealand this month. Even the Bank of Japan is now seen as leaning toward a cut by economists.

“A coordinated global central bank accommodation would create an asymmetric risk reward for owning duration assets,” said Jennifer Kusuma, senior Asia rates strategist at Australia & New Zealand Banking Group Ltd.