Coronavirus impacts bond rates; 10-year Treasury yield hits record lows
The yield on the benchmark 10-year Treasury bond resumed its decline on Thursday and fell to a new all-time low on concerns over the impact of the coronavirus on global financial markets.
The yield on 10-year Treasury bonds fell 3 basis points for the first time to below 1.25%, while the 30-year yield fell by a similar amount to 1.747%. The 10-year rate has dropped 20 basis points since Monday, reflecting global demand for relative safety and positive yields in the US. It is worth recalling that bond yields fall as prices rise..
The decline in yields also reflects traders’ expectations that the Federal Reserve will step in and cut rates at some point. However, many economists doubt that the Fed will take such a step, and there are doubts about the effectiveness of these actions..
«A sell-off attempt on Wednesday quickly reversed course as there was reason to believe the rally in «safe haven» went too far, were greeted with the realities of the still growing outbreak», – by Ian Lyngen, Head of Betting Strategy at BMO Capital Markets. «The news that several dozen new cases are under investigation near New York is only an aggravating factor; I am sure that new infections will be announced soon in different locations.».
«World central banks are rapidly devising measures to set the stage in the hope of a softer landing than might have happened», – he added. «However, there is an argument that the effectiveness of a rate cut or two in order to fight with the outbreak of coronavirus is not worth it spend ammunition that will ultimately be required to overcome «real» downturn in the national economy».
The coronavirus, which began in the Chinese city of Wuhan, has spread globally in recent weeks, raising fears that it could seriously harm global economic activity if not contained with effective intervention. governments.
More than 80,000 confirmed cases of COVID-19, the official name of the virus, have been reported worldwide, with the vast majority in China. According to the World Health Organization, there have been about 3,000 deaths worldwide, with at least 2,600 of them in China..
The Centers for Disease Control and Prevention confirmed on Wednesday the first possible transmission of coronavirus in the United States, causing concern, overshadowing President Donald Trump‘s attempt to calm markets.
Traders have been running out of stocks all week to keep US debt safe amid growing concerns about the disease’s impact on global production, exports and consumption. Saudi Arabia has suspended the entry of foreigners for pilgrimage and tourism purposes, while a Japanese woman became the first person to contract the virus for the second time. Japan announced school closings today.
Since the opening of trading on Monday morning, the index Dow jones Industrial average fell by 2,034 points or more than 7% and continues its worst week since October 2008 during the financial crisis. Index S&P 500 Down 6.6% During The Week, Recording Its Worst Weekly Pace Since 2011.