10-Year Treasury Heads into Uncharted Territory Below 0.5%

 

10-year yield falls below 0.50% as coronavirus fears and falling crude prices combine to increase demand for haven assets. For the the first time in US history the entire yield curve sits under 1%. As virus cases continue to grow, President Trump’s administration is attempting to curb the spread by implementing a temporary expansion of paid sick leave and relieving financial stress faced by some companies. Meanwhile, the New York Fed pledged to increase repo operations this week to “ensure reserved remain ample and to mitigate the risk of money market pressures that could adversely affect policy implementation.” Markets are now pricing in an additional 80 basis points after its 50 bp cut last week.

 

 

OPEC’s production cuts have caused a price war between Saudi Arabia and Russia. The countries failed to reach an agreement on cuts in oil production after fears of the coronavirus impact rattled the market. West Texas Intermediate crude dropped around 34% when Saudi Arabia cut prices by the most they have in over 20 years. The last time oil prices fell to $26 in the US it led to a manufacturing recession in 2016 – economists fear this oversupply oil shock could have a similar impact.

 

 

Day ahead. Today is light on new economic data. China’s consumer price index for February will be out this evening.