The panicked flight by investors to the safety of the U.S. Treasurys despite yields plunging to all-time historic lows of below 1% on Monday seems to confirm fears an economic recession in the United States have already begun its inexorable course.
Events were so grim at Wall Street, where trading was halted minutes after the opening when the S&P 500 plunged by 7%, the entire U.S. yield curve plunged below 1% for the first time in history.
Yield on the benchmark U.S. 10-year Treasury briefly hit an all-time low of 0.318% in overnight trading, adding another 30 basis points to an unprecedented fall in this key interest rate used to determine mortgage rates and car loans. That rate was above 1.5% in mid-February.
The 30-year Treasury yield also hit a record low of 0.702%, plunging below the 1% threshold for the first time in history. Yield on the 10-year Treasury note last touched 0.573%. Yield on the 30-year Treasury bond was at 1.024%.
"A global recession is now a probability, not a possibility," said Stephen Miller, adviser at GSFM, a unit of Canada's CI Financial Group. "We know what the financial crisis looked like, the tech wreck, but this bond rally we're seeing is just unchartered waters."
Jim Cramer of CNBC said Monday's collapse in bond yields and oil prices placed the stock market in "uncharted waters" and that he feared an imminent recession. He further warned the severe drop in yields and oil were "both unprecedented and exceed the chaos of 2007-2009."
Investors Sunday fled en masse into Treasurys and gold as futures on the Dow Jones Industrial Average plummeted a massive 1,198 points, implying an opening loss of 1,246.78 points at Monday's open. The S&P 500 futures and NASDAQ-100 futures also herald huge losses.
The benchmark S&P 500 has fallen 8% so far this year after suffering its worst week since the Great Recession of 2008 at the end of February. It's down more than 12% from its recent peak.
The losses on Monday were far worse than anticipated. Monday was a historic rout on Wall Street with all three top indices diving to record lows. The Dow plummeted 2,014 points, or 7.79%, its biggest single-day loss since October 2008. Before Monday, the biggest one-day loss for the Dow was 1,191 points on February 27.
The S&P 500 crashed as much as 8% on Monday -- its largest intraday drop since 2010 -- before closing 7.6% lower at 2,747 points. The NASDAQ Composite plummeted 7.3% to close 7,950 or 624.94 points lower.
There will likely be an economic recession in the United States this year and the Monday Massacre on Wall Street all seem to point in this direction.
"The collapse in yields and oil is signaling an imminent recession," said former hedge fund manager and TV host Jim Cramer. "I think we need to parse everything and remember that while most stocks aren't buyable, they will get to be that soon enough at this pace."
