Negative U.S. Yields Are in Sight as Virus Spurs Recession Bets

The swirl of fresh coronavirus cases and signs of the severity of the hit on the global economy have seasoned strategists warning that U.S. growth could come to a halt this year and some Treasury yields may drop below zero — possibly as early as this week.
The warnings come as a rout in equities and rate-cut expectations sent long-term Treasury yields to unprecedented lows last week. Over the weekend, China’s manufacturing purchasing managers’ index plunged to the lowest on record amid a surge in coronavirus cases and new fatalities — including the first in the U.S. — around the world.

Rates derivatives traders were already putting on wagers last week targeting the Federal Reserve slashing rates to zero by mid-year. These bets are now likely to intensify as some investors now see the risk of the U.S. economy screeching to a halt or even slipping into a recession by the end of the year. Scott Minerd, the chief investment officer of Guggenheim Partners, said such expectations will push U.S. Treasury yields below zero for the first time.
“The shorter-term securities are going to be negative,” said Minerd who oversees about $215 billion. “This could happen this week.” He said the 10-year Treasury note yield could drop to as low as zero though it would be hard to drop below that.

“Even if you have the 10-year note yield at 25 basis points, you are going to have the majority of the curve at negative rates,” he said.
The stock of global negative-yielding investment-grade debt has jumped back up to over $14 trillion from just under $11 trillion in mid-January. However, most of that is concentrated in Europe where the European Central Bank has slashed its benchmark rate below zero. Negative rates have been long seen as an anathema in the U.S.

With the economic impact of the virus outbreak rippling from China to Europe and the Americas, a slew of Wall Street economists have turned more pessimistic and penciled in Fed rate cuts. Goldman Sachs Group Inc.’s economists on Sunday bumped up how much they expect the Fed to ease in 2020, after adjusting their forecast just last week. They now expect the Fed will cut rates 50 basis points this month, followed by another 50 basis points of easing sometime in the second quarter, Goldman’s Jan Hatzius and Daan Struyven wrote in a note. On Friday, they predicted a 25 basis point cut at the March Fed policy meeting followed by 50 additional basis points in cuts through June.
The 2-year Treasury note yield ended last week at 0.91% in one of its most precipitous declines in the past decade as rates traders ramped up expectations for a rate cut at the March 17-18 policy meeting. Fed chairman Jerome Powell said in rare unschedued remarks Friday that the Fed would act if needed. Since then, the U.S. reported its first related fatality and Washington’s governor declared a state of emergency.

“It’s hard to imagine that the global recession of 2020 hasn’t already commenced,” said Jack Malvey, a debt veteran and former chief global fixed-income strategist at Lehman Brothers Holdings Inc. “A decent part of the U.S. yield curve should end up in negative territory. The question really is only how far out the curve,” said Malvey, who is now counselor at the Center for Financial Stability Inc. He predicted negative rates are likely at least in the 3-year maturity point.

Skittish investors are also continuing with their flight into haven currencies. The Japanese yen surged in early Asia trading versus the greenback to an almost five-month high. That added to gains of over nearly 3.5% last week for the yen. The Australian and New Zealand dollars slid with Australia also reporting its first death from the virus.
“The news about the virus getting worse is destabilizing for markets,” said Shaun Osborne, chief foreign-exchange strategist at Bank of Nova Scotia. “There is probably a bit more of a shake-out to come overall. Yields should fall further and the haven currencies to keep appreciating.”
https://www.bloomberg.com//news/articles/2020-03-01/negative-u-s-yields-are-in-sight-as-virus-spurs-recession-bets

More coronavirus cases, emergency declarations in Calif.

Two new cases of the coronavirus have been confirmed by local health officials, they announced Sunday afternoon.
Two healthcare workers have tested positive for COVID-19, according to Alameda County and Solano public health departments.
The cases are pending confirmation from the CDC.
Both cases work at NorthBay VacaValley Hospital and are currently in isolation at home.
One is a Solano County Resident and the other is an Alameda County resident, the first positive coronavirus case in Alameda County.
Alameda County declared a local public health emergency as part of its ongoing response and preparation for community spread in the county.
Officials say both had exposure to the community-spread case who is currently hospitalized at UC Davis Medical Center in Sacramento. That woman is slowly recovering and her family members had a negative test result for COVID-19 and remain in quarantine.
Hospital staff identified all healthcare workers who had contact with the woman while she was hospitalized. Those workers remain in isolation or in quarantine and will not return to patient care until cleared.
A full contact investigation is underway for the two new healthcare worker cases. Those who may have been exposed are in the process of being identified and evaluated.

2 new coronavirus cases confirmed in Alameda, Solano counties

Samsung and LG Innotek close South Korea plants after confirmed virus cases

Samsung Electronics and LG Innotek have shut their factories in South Korea after a worker tested positive for the coronavirus, the companies said on Sunday.

Samsung’s mobile device factory in Gumi, close to Daegu, where most of the South Korean virus cases have been confirmed, will be closed until Sunday evening for disinfection work while the floor where the infected employee worked will reopen on Tuesday afternoon, a company statement said.
The employee tested positive for the virus on Saturday, Samsung said, adding that it will implement “all necessary measures” to prevent the spread of the virus.
The Gumi line, which was closed temporarily last month after an earlier case was discovered, makes Samsung’s Galaxy Z Flip and Galaxy S20 premium phones, though its production accounts for a small portion of the company’s entire smartphone output.
Meanwhile, LG Innoteck, which supplies camera modules for Apple Inc’s iPhones, shut down its factory in Gumi on Sunday after one of its workers was confirmed to have contracted the virus, a company official said.
The plant will also be closed on Monday for disinfection, the official said.

https://www.marketscreener.com/APPLE-INC-4849/news/Samsung-and-LG-Innotek-close-South-Korea-plants-after-confirmed-virus-cases-30089664/?countview=0

Germany’s coronavirus cases almost double to 129

The number of people infected with the novel coronavirus in Germany jumped sharply to 129 on Sunday, official data showed, as the interior minister said he expected a vaccine by the end of the year.

The latest tally given by the Robert Koch Institute, Germany’s centre for disease control and prevention, showed that the number of cases had almost doubled from 66 on Saturday morning.
Germany’s most populous state of North Rhine-Westphalia has emerged as a hotspot after an infected couple attended carnival celebrations there, infecting dozens of people.
The deadly virus has now reached nine of Germany’s 16 states, with Frankfurt, Hamburg and Bremen among the cities reporting their first COVID-19 cases.
Speaking to the mass-daily Bild am Sonntag, Interior Minister Horst Seehofer said he did not see a swift end to the virus’s spread but was optimistic a cure could be found.
“I estimate that a vaccine will be available by the end of year,” he said, adding that he himself had stopped shaking people’s hands.
Asked whether Germany would go so far as to close off access to cities or regions, he said “such a scenario would be a last resort”.
In Bavaria, machine tool manufacturer DMG Mori asked some 1,600 employees not to come to work on Monday after a worker contracted the virus.
Several hundred people meanwhile were released from quarantine in the district of Heinsberg in North Rhine-Westphalia, allowing them to leave their homes again.
The cluster there has been linked to a carnival gathering on February 15.
Four kindergarten children in Heinsberg also tested positive for the new coronavirus at the weekend, apparently contracted through a member of staff.
Germany has cancelled several major gatherings in a bid to curb the spread of the virus, including this week’s ITB travel trade fair in Berlin.
The Michelin Guide restaurant star rating awards slated to take place in Hamburg on Tuesday have also been called off.
Organisers of the Leipzig book fair however said the event, which attracted over 280,000 people last year, would go ahead as planned from March 12-15.
As the coronavirus continues to disrupt air travel and supply chains around the world, Finance Minister Olaf Scholz said the government stood ready to stimulate Germany’s export-driven economy if the impact worsened.
“If the situation calls for it, we have the means to launch a fiscal stimulus package,” he told Die Welt newspaper.
https://medicalxpress.com/news/2020-03-germany-coronavirus-cases.html

Virus cases in Italy soar 40%; US urges Americans not to go

The number of people infected in Italy with the new coronavirus rose 40% to 1,576 in just 24 hours, Italian authorities announced Sunday, adding that five more infected people had died. The news came as a new U.S. government advisory urged Americans not to travel to the two Italian regions hardest hit by the virus.

That brings the number of deaths in Italy to 34 since cases of the virus exploded in the country on Feb. 21.
Italian health authorities say the increase is expected, since it takes as long as two weeks for containment measures to take effect, and because Italy has a large number of elderly people.
The U.S. travel advisory cited quarantines set up in 10 towns in Lombardy and one in Veneto, with a combined population of 50,000 people, as well as the ”the level of community transmission of the virus.” It followed an earlier warning late Friday for Americans to avoid non-essential travel to all of Italy.
Tourism officials call the U.S. warning covering all of Italy potentially calamitous to the industry, which represents 13% of gross domestic product in a country famed for its world-class museums, archaeological sites, art cities and natural beauty.
More than 5.6 million Americans visit Italy every year, representing 9% of foreign tourists and the second-largest national group behind Germans, according to the most recent statistics.

Lombardy, which includes Italy’s financial capital of Milan, accounts for just over half of the cases while Veneto and Emilia-Romagna have 18% and 20%, respectively. All three regions have closed schools for the time being. In Veneto and Lombardy, closures also have hit museums, theaters, cinemas and most public offices, emptying cities like Milan, where many companies have permitted office workers to telecommute.
Earlier Sunday, the French community church in Rome, St. Louis of the French, closed its doors to the public after a priest was infected with the new virus.
The church in the historic center of Rome is famous for three paintings by the Baroque master Caravaggio, making it a destination for tourists and the faithful alike. A sign on the door Sunday noted in French that the church had been closed as a precaution by the French Embassy for both Masses and tourist visits until further notice.
The Religious Information Service news agency reported that the church was closed after a 43-year-old priest who had returned to Paris was hospitalized after being infected by the coronavirus. The service carried a statement by the archbishop of Paris, Michel Aupetit, who said the priest, who had been living in Rome, returned to Paris by car in mid-February, and tested positive for the virus on Friday. He was in good condition, Aupetit said.
It was the first church in Rome closed by the virus. Churches in much of Veneto and Lombardy have closed their doors under widespread measures aimed at containing the spread of the virus. Televised Masses have been available for the faithful.
https://medicalxpress.com/news/2020-03-virus-cases-italy-soar-urges.html

Coronavirus: who is most at risk of dying?

As the number of confirmed coronavirus cases across 61 countries hit 86,000 Saturday with nearly 3,000 deaths to date, the profile of those most at risk of dying is coming into focus, experts told AFP.

But the overall mortality rate remains uncertain, they said.
The World Health Organization raised its global risk assessment to its top level Friday, with the global health crisis edging closer to a pandemic.
Among those infected with the virus, older adults with preexisting heart conditions or hypertension face a sharply higher risk, according to preliminary statistics, including from a study covering more than 72,000 patients in China.
Among a subset of 44,700 infections confirmed through lab tests as of mid-February, more than 80 percent were at least 60 years old, with half over 70, said the study, that was published in the official China CDC Weekly.
Initial reports from outside China are similar, with the first 12 victims reported in Italy mostly in their 80s, and none under 60. Several had known heart problems.
Men in the China study were more likely to die than women by a margin of almost 3-to-2.
But whether that was due to behaviour—notably that most men in China smoke, while few women do—or biological factors, such as hormonal differences, is still unknown.
One striking finding from the China study is the near absence of cases among children.
The 10-19 age bracket comprised one percent of infections, and a single death. Children under 10 made up less than one percent, with no deaths reported.
“We are still trying to wrap our heads around the deficit of cases among those under 20,” Cecile Viboud, an epidemiologist at the US National Institute of Health’s Fogarty International Centre, told AFP in an interview.
“Is it because young children are less susceptible than adults, and thus simply don’t get infected? Or if they do, that they have less disease?”
It is surprising infections of very young people are so low, she added, because they tend to be among the hardest hit by almost all respiratory infections—whether viral or bacterial.

David Fisman, an epidemiologist at the University of Toronto, was also mystified.
“Where are the infected children???,” he wrote in an email. “This is critical—perhaps kids are not being tested because they have mild symptoms.”
Another possible explanation is that children in China were out of school for the lunar new year holiday when the virus began to spread widely in January.
“But young children still live in households where they can be infected by their parents,” Viboud noted.
A lower rate of infection among the youngest age groups was also seen during the 2002-03 outbreak of SARS, but was less marked.
SARS, which is also a coronavirus, broke out in Guangdong Province and killed 774 people out of 8,096 infected.
The death of 34-year old Wuhan doctor Li Wenliang in early February, along with several more health workers in their twenties sparked speculation they had died because of repeated exposure, or even sheer exhaustion.
Li’s death sparked outrage in China because he had been muzzled by authorities for calling attention to the virus.
Cellphone video images on social networks showed nurses and doctors, unable to cope with the caseload, breaking down in hysterics.
“A more likely reason why young clinicians are getting infected is because they were operating outside their level of expertise and training,” John Nichols, a professor in the department of pathology at the University of Hong Kong, told AFP.
“It is noble that the junior doctors pony up valiantly to help, but they most likely would not have had the necessary training in handling infectious patients.”
The larger question of just how lethal COVID-19 is, remains unanswered.

‘Somewhere in the middle’
The ratio of confirmed cases to deaths suggests a mortality rate of 3.4 percent, but several studies have concluded that up to two-thirds of infections in China and elsewhere have gone undetected, which would make the virus far less deadly.
“At the moment, we don’t have a good understanding of the real mortality rate,” Sharon Lewin, director of the Doherty Institute for Infection and Immunity at the University of Melbourne told Australian television.
“It is estimated at about two percent.”
With SARS—which killed nearly one in 10 patients—early mortality figures turned out to be underestimates, in part because victims of the virus did not die quickly.
With the 2009 H1N1 influenza pandemic, however, the opposite happened, said Viboud.
“Within a few weeks of the outbreak, the mortality estimate declined first 10-fold, and then 100-fold, as we moved from severe pneumonia to getting all flu cases.”
“Here, I think we are somewhere in the middle,” she added, saying the current two percent mortality estimate could well decline.
The seasonal flu has an average mortality rate of about 0.1 percent but is highly infectious, with up to 400,000 people worldwide dying from it each year.
The China CDC study showed that COVID-19 was “mild” for more than 80 percent of confirmed cases.
https://medicalxpress.com/news/2020-03-coronavirus-dying.html

Study: Coronavirus may have been around Seattle for weeks

The coronavirus may have been circulating for weeks undetected in Washington state, a preliminary finding that could mean hundreds of undiagnosed cases in the state that’s also home to the nation’s first confirmed infection and now the first death, researchers said Sunday after analyzing genetic samples of the pathogens.

State and local authorities stepped up testing for the illness as the number of new cases grew nationwide, with new infections announced in Illinois, Rhode Island and Washington state. Authorities in the Seattle area said two more people had been diagnosed with the COVID-19 virus, both men in their 60s who were in critical condition. Those cases brought the numbers to six in Seattle.
A man in his 50s died in Washington on Saturday and health officials said 50 more people in a nursing facility in Kirkland, Washington, are sick and being tested for the virus.
Elsewhere, authorities announced Sunday a third case in Illinois and Rhode Island’s first case as worried Americans swarmed stores to stock up on basic goods such as bottled water, canned foods and toilet paper. The hospitalized patient in Rhode Island is a man in his 40s who had traveled to Italy in February.
As the fallout continued, Vice President Mike Pence and Health and Human Services Secretary Alex Azar sought to reassure the American public that the federal government is working to make sure state and local authorities are able to test for COVID-19. Both said during a round of TV talk show appearances Sunday that thousands more testing kits had been distributed to state and local officials, with thousands more to come.
“They should know we have the best public health system in the world looking out for them,” Azar said, adding that additional cases will be reported and the overall risk to Americans is low.
As Americans prepared, researchers at the Fred Hutchinson Cancer Research Center and the University of Washington on Sunday said they had evidence that COVID-19 may have been circulating in the state for up to six weeks undetected—a finding that, if true, could mean hundreds of undiagnosed cases in the area. The research was not published in a scientific journal or reviewed by other scientists.

Trevor Bedford, an associate professor who announced the preliminary findings on the virus in Washington state, said on Twitter late Saturday that genetic similarities between the state’s first case on Jan. 20 and a case announced Friday indicated the newer case may have descended from the earlier one. The Jan. 20 case was the first known case in the U.S.
“I believe we’re facing an already substantial outbreak in Washington State that was not detected until now due to narrow case definition requiring direct travel to China,” he said on Twitter.
Bedford did not immediately reply to an e-mail requesting an interview Sunday.
Scientists not affiliated with the research said the results did not necessarily surprise them and pointed out that for many people—especially younger, healthier ones—the symptoms are not much worse than a flu or bad cold.
“We think that this has a pretty high rate of mild symptoms and can be asymptomatic. The symptoms are pretty non-specific and testing criteria has been pretty strict, so those combinations of factors means that it easily could have been circulating for a bit without us knowing,” said Justin Lessler, an associated professor of epidemiology at the Johns Hopkins Bloomberg School of Public Health.
“And that was what a lot of us was thinking was likely.”
Pence, named by the president to be the point-person overseeing the government’s response, said more than 15,000 virus testing kits had been released over the weekend. And, the administration is working with a commercial provider to distribute 50,000 more, he said.

The vice president said testing was among the first issues raised by governors he’s spoken with so far. Several states have begun their own testing, including Washington state, Oregon and Illinois.
“We’re leaning into it,” Pence said.
Azar said more than 3,600 people already have been tested for coronavirus and the capability exists to test 75,000 people. He forecast a “radical expansion of that” in the coming weeks.
Pence and Azar spoke a day after President Donald Trump approved new restrictions on international travel to prevent the spread within the U.S. of the new virus, which originated in China. There are now more than 80,000 cases worldwide and about 3,000 deaths.
Two Americans are now known to have died of the virus, one in Washington state and one in China.
The new U.S. travel restrictions apply to Iran, although travel there by Americans already is severely limited, as well as heavily affected regions of Italy and South Korea. Trump tweeted Sunday that any travelers from those countries will be screened when they arrive in the U.S.
The number of known coronavirus cases in the U.S. had reached 70 as of Sunday.

Trump said Saturday at a White House news conference that he was thinking about closing the southern border with Mexico as a precaution. Azar said Sunday that Mexico has few coronavirus cases and that it would take a dramatic change in the circumstances there to prompt serious consideration of a border shutdown.
The president, Azar said, “was trying to say everything’s on the table.”
“We will take whatever measures are appropriate and necessary to protect the American people, but we don’t forecast doing that any time soon,” he said of closing the border.
Pence noted that an infectious disease expert is joining an existing White House coronavirus task force on Monday. Last week, Pence announced the addition of Debbie Birx, a State Department ambassador-at-large and medical doctor who is the administration’s global HIV/AIDS response coordinator, to the virus panel.
Despite calls by Trump and Pence for political unity in the face of the viral threat, the issue has become mired in the partisan rancor in Washington, with both Republicans and Democrats accusing each other of mining the issue for political gain.
Trump, at a political rally last week, accused Democrats of “politicizing” the issue and said their criticism of his handling of the public health challenge was their new “hoax.”
At the White House on Saturday, Trump said he was not trying to minimize the threat from the virus.

“Again, the hoax was used in respect to Democrats and what they were saying,” he said Saturday.
Democratic presidential candidate Joe Biden, who emerged victorious Saturday night from South Carolina’s primary, criticized the administration over the availability of testing kits.
Biden also panned the administration’s decision to have political appointees Pence and Azar, neither of whom are scientists by training, appear on the Sunday shows, instead of an expert like Dr. Anthony Fauci, the National Institutes of Health infectious disease chief.
Biden claimed the administration doesn’t have testing kits. Pence and Azar said thousands of kits had been distributed.
Azar said he didn’t know what Biden was talking about when the former vice president said testing kits didn’t exist. Azar said the Centers for Disease Control and Prevention had developed a lab test for coronavirus with “historic speed.”
Pence was interviewed on CNN’s “State of the Union” and Azar commented on “Fox News Sunday,” CBS’ “Face the Nation” and ABC’s “This Week.” Biden commented on CNN.
https://medicalxpress.com/news/2020-03-coronavirus-seattle-weeks.html