Investors in World Bank’s ‘pandemic bonds’ face big losses due to the coronavirus outbreak

By Weizhen Tan

Investors are looking at big losses in two World Bank-issued “pandemic bonds,” which have fallen under the spotlight as the coronavirus outbreak continues to spread worldwide.

[…]

The bonds offer investors high interest payments in return for taking on the risk of losing a certain amount or all of their money if pandemics occur. That includes the current coronavirus pandemic.

[…]

But prices of those bonds have plunged as investors flee with the number of infection cases surging. Growing fear about the economic fallout of the outbreak has driven a sell-off in risk assets as investors seek the perceived safety of government bonds like U.S. Treasurys.

[…]

According to ratings agency DBRS Morningstar, investors who hold the riskier of the two bonds could be losing their entire principal amount soon, with the firm telling CNBC that the price should have dropped more than 80%.

[…]