Equity stabilized but bonds remain well demanded

FX Street
Date: Mar 04, 20200

Actions to curtail the Covid-19 impact have continued today. Both Hong Kong and Taiwan’s central banks have cut interest rates today, while S. Korea, one of the most affected countries by Covid-19, announced USD 9.8bn of additional stimulus, and said it would consider outright purchases of treasury bonds if market volatility continues. The BoJ also said they are ready to act if the epidemic is prolonged. In Europe, the Eurogroup said the finance ministers are prepared to implement country-specific fiscal measures to support growth.

The Fed fund futures price an additional 25bps interest cut at its March meeting, while the the odds of a 50bps interest rate cut are also high. For the ECB, the OIS futures prices in an 85% probability of a 10bps ECB interest rate cut next week. While expectations of an ECB liquidity stimulus aimed at helping SMEs are also high.

Meanwhile, the U.S. service confidence showed a strong reading in February, in light of the impact of Covid-19. The ISM Non-Manufacturing PMI index (57.3, consensus 54.8, previous 55.5) extended further into the expansion territory, also increasing above market expectations and reaching a one-year high.    [FULL  STORY]

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