Global stocks rose as investors bet central banks will take steps to stabilize markets and shield growth from the economic impact of the coronavirus.
Investors piled into wagers that the Federal Reserve and other major central banks may lower interest rates, possibly in tandem to boost the firepower of these stimulus efforts. The yield on the benchmark 10-year U.S. Treasury note plumbed new lows, sliding to a recent 1.080%, according to Tradeweb, from 1.127% Friday.
“We’re seeing an elevated degree of volatility that’s likely to remain with us for a while in equities, but also in bonds and across asset classes,” said Richard McGuire, head of rates strategy at Rabobank. “We are seeing a reversal of the feel-good factor we saw overnight.”
Stocks globally had initially surged after the Bank of Japan joined the Federal Reserve in pledging to take action in response to the coronavirus epidemic. Gov. Haruhiko Kuroda’s comments prompted bets that central banks could take coordinated steps to stimulate the world economy and ease the strain on financial markets following last week’s rout.
Faced with the challenge of lifting growth when interest rates are already low in many advanced economies, central banks could decide to act in concert, Mr. McGuire said. He pointed to the Bank of England’s statement that it was working closely with international partners to protect financial and monetary stability.
Meanwhile, echoing the BOJ and Federal Reserve, a senior official at the European Central Bank later said the ECB could take its interest rates further into negative territory and begin new bond purchases to support the eurozone economy. Vice President Luis de Guindos warned that the outbreak may hurt exports, supply chains and demand for services.