A trader reacts as he works on the floor of the New York Stock Exchange (NYSE) on January 10, 2020 in New York City.
Kena Betancur | Getty Images
The benchmark 10-year Treasury yield broke below 0.5% for the first time ever as coronavirus fears, coupled with an all-out oil price war, sent investors flocking to safer government bonds.
The yield on the benchmark U.S. 10-year Treasury briefly touched an all-time low of 0.499% in overnight trading Sunday. The yield was last trading at 0.536%. Bond yields move inversely with prices.
The benchmark rate has tumbled 40 basis points in March alone. The 30-year Treasury yield also hovered near its record low, threatening to breach 1%.
The fast-spreading coronavirus kept investors on edge for weeks as the outbreak has the potential to disrupt global supply chains and tip the economy into a recession. As of Sunday, global cases of the infection have climbed to more than 109,000 with at least 3,801 deaths around the world.
Adding to stress is a shocking all-out oil price war after OPEC talks collapsed last week. Saudi Arabia on Saturday slashed official crude selling prices for April, in a sudden U-turn from previous attempts to support the oil market as the coronavirus hammers global demand.
Stock futures tumbled in overnight trading, with the Dow Jones Industrial Average set to open more than 1,000 points lower. The Dow and the S&P 500 both fell into correction territory as worries over the coronavirus deepened.
The Federal Reserve slashed interest rates by half a percentage point last week in between its policy meetings, the first such emergency cut since the financial crisis. The market has already priced in more aggressive easing at the Fed’s March 18 meeting.
While the coronavirus poses a new threat to the global economy, the bond market has been flashing various warning signs about the economy for a while now. Last summer, the benchmark 10-year yield dipped below the 2-year rate, inverting a key part of the yield curve. The inversion has been a reliable recession indicator as the phenomenon has preceded every recession over the past 50 years.
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