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Dual Coronavirus, Oil Shocks Crash World Markets, 10Y Yield Craters, Futures Pinned Limit Down

March 9, 2020

Dual Coronavirus, Oil Shocks Crash World Markets, 10Y Yield Craters, Futures Pinned Limit Down

Global stocks plunged with the Emini locked limit down for the longest period on record, crude oil tumbled as much as 33% as WTI plunged as low as $27.34, and the yield on the 10Y Treasury crashed to an all time low of 0.31% after Saudi Arabia launched a price war with Russia, sending investors already panicked by the coronavirus fleeing for safe assets.

As noted overnight, the catalyst for today’s historic rout was the plunge in crude, which tumbled as a result of Saudi Arabia launching an all out price war, one which may result in as much as a 4 million barrel production surplus per day, and which at one point tumbled more than 30%, the most since the Gulf War in 1991. After paring some losses, WTI and Brent remained down about 20%.

There were also worries that U.S. oil producers that had issued a lot of debt would be made uneconomic by the price drop.

As Bloomberg notes, the oil-price crash, if sustained, would upend politics and budgets around the world, exacerbate strains in high-yield credit and add pressure on central bankers trying to avert a recession. It typically would have proved a boon to consumers, but the coronavirus is increasingly keeping them at home.

Spooked by the implications for energy stocks, and the imminent crash in the junk bond market, S&P 500 futures fell 5%, triggering trading curbs designed to limit the most dramatic moves while cash markets are closed. Two major exchange-traded funds that track U.S. benchmark gauges posted even bigger declines in pre-market trading. They are not subject to the same curbs.

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