Markets a bit busy So I will be relaying some Important points I read instead of sharing some of my thoughts.
From IFR news:
Not being contained is the behavior of the financial markets. The UST market had one of its wildest sessions on record overnight. Volumes at 10X the trailing average were not all that special. That the 30-year traded within a 25 bps range (1.54% to 1.29%) was near unprecedented. Even more unparalleled is that Dealers relay that there were stretches of time where the long-end of the curve was bid-up without any offers on the screens.( highlights my own)
As has been written the coronavirus epidemic has put markets and its participants on global recession watch as much economic activity comes to a grinding halt. Street estimates now see a contraction of Q-1 global GDP at near -5% annualized with Q-2 not seen as shaping up much better.
The hope is that the warmer weather will act as a deterrent for the further spread of the virus. And that authorities hopefully get a handle on containing the virus and that a sharp economic recovery can be had in H-2 of this year. Few are seen as holding their breath on this outcome.
Indeed, sentiment is quickly shifting in the other direction. That is that the economic downturn will be prolonged and if so, will put corporate revenues and profits at risk and all that would bring with it.
As Jeffery Gundlach opined (and we concur) what could well occur is that companies are forced to layoff staff and if so with this expected to first show up in the weekly unemployment claims data.
The concern though goes beyond the economy and into the markets themselves. Here what is happening in the equity markets is self-evident with a case to be made that the could well be more precipitous falls ahead.
Moving onto the radar are the credit/debt markets from high-yield down to high-grade. The concern is that there could be a “run” on these markets. At issue is that many a corporation is seen as over-leveraged and up to their eyeball in debt. Should their revenues/profits sufficiently suffer (think US shale concerns and beyond) the logical progression is that many may have difficulty servicing this massive pile of debt