By Matt Wirz 

U.S. Treasury bond prices fell Wednesday morning, signaling a deceleration of the flight to safety triggered earlier in the week by the spread of the coronavirus.

Investors paused in buying the government bonds mostly because yields, which fall as bond prices rise, dropped to record lows Tuesday, traders and analysts said. Several said demand could surge again if evidence emerges of a significant outbreak in the U.S.

"The 10-year broke through a record-low yield yesterday and it's hard to see the market going much further absent more bad news," said Thomas Simmons, an economist at Jefferies LLC.

The yield of the 10-year Treasury was around 1.347% Wednesday from 1.328% Tuesday, while the 30-year bond's yield climbed to 1.824% from 1.803% Tuesday, according to data from Tradeweb.

Fears that the coronavirus could hurt the global economy sent the 10-year yield to as low as 1.310% Tuesday. That suggests investors see a relatively high chance that the U.S. Federal Reserve could cut rates soon, but so far economic indicators don't bear that up, Mr. Simmons said.

Economic fallout from the virus isn't likely to have a material impact on the U.S. economy until the second quarter of the year, and it will take more time for that data to be disseminated, Mr. Simmons said. Fed officials next meet to consider changing interest rates in mid-March.

Bonds of energy companies weakened Wednesday, despite recovering risk appetite and a relief rally in stocks, as investors braced for more bad news from oil and gas producers.

Chesapeake Energy Corp.'s bond due 2025 fell to 68.75 cents Wednesday after the company reported a decline in revenue, down from 72.25 Tuesday, according to data from BondTicker. Occidental Petroleum Corp.'s bond due 2049, one of the most actively traded corporate bonds in the U.S. on Wednesday, fell to as low as 103.14 cents on the dollar from 105.60 on Tuesday. The company is slated to report earnings this week.

More broadly, rising Treasurys prices have boosted investment-grade corporate bonds, which typically move in lockstep with the government debt. Investment-grade corporate bonds returned 3.6% this year through Tuesday compared with a 4% gain in U.S. government bonds and a roughly 3% loss in U.S. stocks, according to research from CreditSights

The spread between yields of investment-grade bonds and Treasurys is likely to widen slightly, but investors "shouldn't be fussed about that, " said Erin Lyons, a strategist at CreditSights. The yield differential of about 1.13% is larger than that of many other comparable bonds, giving the corporate debt good relative value, she said.

Write to Matt Wirz at matthieu.wirz@wsj.com

(END) Dow Jones Newswires

February 26, 2020 13:03 ET (18:03 GMT)