Is “More of the Same” Still News?

Today is beginning with another massive sell-off in equities and another massive rally in Treasury bonds. Yep, the coronavirus is still going viral. Overnight, the Bank of England cut its 75 basis point policy rate by 50 basis points in an emergency attempt to do something constructive. That doesn’t leave them much room going forward, an undesirable situation that faces America’s central bankers, too. For now, the Ten-Year is up about a point for a yield of 70 basis points the Two-Year will get you about 40 basis points and duration investors should expect about 1.20% on the Long Guy.

Also today, investors got some new inflation news through a new report on the Consumer Price Index. Headline inflation moved from 2.5% in January to 2.3% last month. Without food and energy, core inflation moved up from 2.3% to 2.4% year-over-year. With the damage being done to aggregate demand from the fear of the virus, it’s hard to see how future measures will give policy makers the inflation cushion they’ve been looking for since 2012.