Bond Yields plunge below 1%

10-Year T-Note Yield Plummets To A New Record Low On Global Economic Concerns

cmdtyNewswires – Mon Mar 9, 9:53AM CDT

Jun T-notes (ZNM20) this morning are up +2-12/32 points. The 10-year T-note yield is down -33.0 bp at 0.732%.

Jun T-note prices this morning catapulted to a fresh contract high, and the nearest-futures March 2020 contract surged to an all-time high. The 10-year T-note yield plummeted to a new record low of 0.314%.

A freefall in global equity markets today, along with heightened corporate credit risk, has fueled massive safe-haven buying of T-notes and pushed yields down to record lows. Crude oil prices today have plummeted more than 21% to 4-year lows as the OPEC+ alliance disintegrated.

Crude prices are sinking today, which is bullish for T-notes, after Saudi Arabia over the weekend signaled it would ramp up oil production. Saudi Arabia’s state-owned Aramco said it plans to raise crude output well above 10 million bpd next month and could reach a record 12 million bpd. The Saudi move is retaliation from last Friday when Russian Energy Minister Novak said that Russia would not agree to further production cuts and told OPEC ministers in Vienna that, “all OPEC+ countries from April 1 have no obligation to cut output.”

Concern about the economic fallout from the spreading coronavirus is another major bearish factor for global stocks and bolsters expectations for additional Fed rate cuts. Confirmed cases of the coronavirus have risen above 108,000 in more than 90 countries, with deaths exceeding 3,700. The fed funds market has fully priced in an additional -75 bp Fed rate cut at next week’s (Mar 17-18) FOMC meeting and another -25 bp cut by July.

Concerns about corporate credit risk are also spurring safe-haven demand for T-notes. The Markit CDX North American Investment Grade Index, a credit derivatives index that measures the perceived risk of corporate credit, jumped to a 4-year high this morning. Concern the global economy may be headed for a recession has investors fleeing corporate bond markets.

Increased financial turmoil has prompted the Fed today to increase the amount offered in its daily overnight repo operations to at least $150 billion from $100 billion. The New York Fed said the offerings were an increased effort to “ensure reserves remain ample and to mitigate the risk of money market pressures that could adversely affect policy implementation.”

Global economic concerns from the spreading coronavirus also boosted government bond prices throughout the world, which is bullish for T-notes since overseas capital is being attracted into Treasury securities. The 10-year UK gilt yield today dropped to a new record low of 0.075% on expectations the UK government will boost stimulus measures to combat the adverse effects of the coronavirus.

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