A major selloff in equities is making its way across the globe as the number of new coronavirus cases flares outside China, with the disease now spreading to at least 28 countries. Italy has canceled all public events in Venice and Milan as it confirmed 150 cases (and four deaths) of the virus over the weekend. Meanwhile the number of people diagnosed in South Korea, which raised its disease alert to the highest level, is nearing 800. The U.S. market is also experiencing a steep drop, with Dow futures plunging over 800 points and crude oil down 3.6% amid renewed concerns over the global demand outlook. Gold catches the safe -haven bid and is up 2.4% to a seven-year high of $1689/ounce.
Trade optimism is being overshadowed by virus fears as yields continue to plunge. The 10-year U.S. Treasury is down eight bps to 1.38% - its lowest level in about four years. The 30-year is at a record-low of 1.84%. Those yields, tower over ones seen in Europe as Germany’s 30-year Bund turned negative for the first time since October, leaving the entire yield curve in the Eurozone’s biggest economy below zero.
Some big earnings are coming out over the next few days with HP, Intuit, and Palo Alto Networks among those reporting. Key data points this week will be jobless claims, manufacturing data, and real consumer spending. We will also hear from FOMC’s Kaplan and Kashkari, ECB President Lagarde, and Chicago Fed President Evans.
YTD Returns as of EOD Friday 02/21/20
US Barclays Agg +2.47%, 2.03% yield, -23 bps excess returns
US Barclays Corp +2.46%, 2.51% yield, -35 bps excess returns
UST 10yr 1.377%, -54 bps
S&P 500 3,248.12, +3.61%
DJIA 28,185.01, -1.25%
OIL (WTI) $50.91, -16.67%
Gold 1,680.71, +10.53%
*Excess returns are returns achieved above and beyond the return of similar duration US Treasuries
Spring has sprung and with it, more economic activity and hopes for a more sustained recovery emerge.
We sat down to interview two of IMTC's senior managers on their perspective as former fixed income portfolio managers.