Pro Perspectives 3/6/20

March 6, 2020

The 10-year yield over the past couple of weeks has been the most important market to watch for clues on how deep the stock market decline would be. 

Remember, we looked at this chart of the record lows in the U.S. 10-year government bond yield …

Not only has this level given way, but we plunged to as low as 66 basis points today on the 10-year.  Here's an updated look at that chart …

As we discussed a couple of weeks ago, this breakdown will bring about speculation of the U.S. going to negative rates.  That's happening.  And that brings about the deflation-forever, secular stagnation pontifications.  That's a big threat to consumer and business confidence.  This will force policymakers to do more.

Remember, historically turning points in markets like these, are marked by some form of intervention.  I suspect we'll see more, bigger, bolder intervention.  And markets can turn well before there is clarity on the outcome (the coronavirus, in this case).