Bond Traders Dare to Consider Crisis-Era Rates After Yields Drop
- Traders see further Fed rate cuts to blunt the virus’s impact
- Two-year yield set for one of biggest weekly drops since 2008
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Mounting fear about the global impact of the coronavirus has traders bracing for a return to financial-crisis era interest rates.
Short-term yields are suffering one of their most precipitous declines in the past decade, with the rate on two-year U.S. notes plunging more than 20 basis points since Feb. 21. That’s one of the biggest weekly drops since 2008, when the global financial system seized up and two-year yields sank 51 basis points. Traders, meanwhile, are now pricing in around three quarters of a point of Federal Reserve easing this year, and some are hedging against the prospect that Chairman Jerome Powell might need to take the U.S. benchmark back toward zero.