Oil prices slumped early Monday with the US bond yield curve falling below 1% for the first time ever
The ongoing volatility in the markets resulting from the continued spread of the Covid-19 coronavirus will likely get much worse.
Bloomberg Intelligence says that its gauge of financial stress in the US is showing worrying signs, having deteriorated more in the past 16 days than in the 82-day peak-to-trough decline seen in the market shake-up of December 2017.
“This is happening at light speed this time, and it’s mostly because of credit spreads widening so much, it’s not about bank liquidity,” said Ira Jersey, chief US interest rates strategist at Bloomberg Intelligence. “We’re pricing in a global recession of some magnitude.”
Oil price crash
Monday’s early trade in oil saw the commodity crash more than 30% as a price war erupted following a breakdown in agreement between OPEC and Russia over output cuts.
International benchmark Brent fell to around $30 and Goldman Sachs warned $20 is not unrealistic.
“We have had a demand shock and now we have a supply shock as well. It’s unprecedented,” Tamas Varga, an analyst at PVM Oil Associates Ltd. in London told Bloomberg.
The oil price slump prompted the entire yield curve for US bonds to fall below 1% for the first time in history with an unprecedented global bond rally.
Recession almost certain
A global recession is now almost inevitable according to Nigel Green, CEO of financial advisory the deVere group, due to declines for the markets and the wider impact of the coronavirus outbreak.
“It comes as the world scrambles to deal with the market mayhem and economic fallout caused by the relentless global spread of coronavirus,” he said. “With the combination of the implications of the oil stand-off and the outbreak, I now believe that it’s almost inevitable that there will be a global recession this year.”
Volatility traders haven’t been this spooked since the financial crisis, according to a key gauge of fear on Wall Street https://t.co/XnbpN5RVCI pic.twitter.com/UJqluNRdt8
— Bloomberg (@business) March 9, 2020
