Dow Shoots Up More Than 1,000 Points, But Yields Still Near Record Lows

Tell me when it’s over… that’s how many investors felt about the stock market selloff last week. The Dow Jones suffered its largest point drop in history and the largest percentage drop since the great financial crisis. But in an instant, the fear lifted and the Dow gained more than 1,000 points on Monday.

Is it over? Maybe, but bonds don’t think so.

The 10-year U.S. Treasury bond yield sits at 1.08%, and 30-year Treasury bonds trade at 1.64%. That’s not a lot of return for locking up your money, which indicates bond investors remain fearful.

Gennadiy Goldberg, an interest rate strategist at TD Securities in New York, said:

“The Treasury move has been bigger and it actually started much earlier.”

Treasuries are viewed as one of the world’s safest investments and gain as investors flock to safety during times of uncertainty. A continued strong demand for these assets reflects that risk appetite remains low, which is negative for stocks.

Interest rate futures traders are fully pricing in a rate cut at this month’s Federal Reserve meeting, and see a 75% chance of an additional cut in April, according to the CME Group’s FedWatch Tool.

But the question remains, will it help?  If the Fed lowers rates, will it somehow convince people to buy more stuff or venture to the market in areas hit by the coronavirus?  It seems unlikely, but word of a possible rate cut is what sent stocks soaring.  We’ll see if they can hold their gains.

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