Oil Collapse Sparks Lowest Bond Yields in History: Markets Wrap

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(Bloomberg) — Oil prices crashed, equities plunged and currencies and bonds saw wild moves as panic appeared to grip financial markets as the world headed for a full-blown price war in crude.

Futures on the fell about 5%, triggering trading curbs. Japanese stocks sank 6% and futures on the U.K.’s tumbled over 6%. Exchange rates including the and saw sudden moves that showed traders struggling to establish where new trading ranges might be. Sovereign bond yields plumbed fresh lows, on mammoth moves including a tumble of more than a quarter percentage point for U.S. yields.

Among the tumultuous moves to kick off the week:

  • For the first time, the fell below 0.5% and the yield dropped under 1%
  • plummeted more than 30%, sliding the most since the Gulf War in 1991. The broader Bloomberg Commodity Index hit its lowest since 1986
  • slid to its weakest against the dollar since the 1980s. Mexico’s slid as much as 8%, to the weakest since the aftermath of border-wall advocate President Donald Trump taking office
  • Australian and New Zealand 10-year government bond yields hit record lows
  • The climbed to its strongest since 2016

The oil-price crash, if sustained, would upend politics around the world, exacerbate strains in U.S. high-yield credit and add pressure on central bankers trying to avert a recession. It would otherwise prove a boon to consumers, but the coronavirus is increasingly keeping them at home. Italy over the weekend effectively put its industrial heartland in the north of the country on lockdown.

Equities and haven assets showed little immediate reaction to news that the Trump administration is drafting measures to blunt the economic fallout from the virus — speaking to the state of stress in markets.

“You just don’t know which way things are going to go, it makes it very hard to price anything right now,” said Sarah Hunter, chief economist for BIS Oxford Economics, on Bloomberg TV. “We’re seeing that in the market with the wild oscillations that are coming through.”

Here are some key events coming up:

  • The European Central Bank’s policy decision comes Thursday amid expectations it may ease policy.
  • The U.K. Chancellor of the Exchequer unveils the government’s 2020 budget on Wednesday.
  • The U.S. core consumer price index, due Wednesday, is expected to remain subdued in February.

These are the main moves in markets:

Stocks

  • Futures on the lost 4.9% as of 2:35 p.m. in Tokyo. The underlying gauge fell 1.7% on Friday.
  • Japan’s index was down 6.3%.
  • Australia’s Index plunged 7.3%.
  • Hong Kong’s fell 3.8%.
  • lost 2.8%.
  • {{8867|Euro futures}} fell 6.6%.

Currencies

  • The yen surged 2.5% to 102.73 per dollar.
  • The bought $1.1406, up 1.1%.
  • The Mexican peso was down 4.9%.
  • China’s was flat at 6.9385 per dollar.

Bonds

  • The yield on 10-year Treasuries dropped 24 basis points to 0.53%; 30-year yield was down 30 basis points at 0.98%.
  • Australia’s 10-year yield retreated about six basis points to 0.62%.

Commodities

  • West Texas Intermediate crude sank 30% to $29.04 a barrel.
  • was down 0.7% at $1,662 an ounce.
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