Coronavirus: VW and BMW stop production in Europe – Turbulences on Bond Markets

“Blood on the streets”?

Because of the coronavirus, German car companies are shutting down production in Europe. BMW, for example, announced that it would shut down production in Europe (and South Africa) until April 19th. Volkswagen will stop production in Europe for the next ten days.

But perhaps even more important is what is currently happening in the bond markets! For example, the yield on the 10-year US government bond is rising from 1.00% to now 1.21% – a sharp move. This means that even “safe havens” are now being sold off. A sign that there is now “blood on the streets”, as one Anglo-Saxon commentator puts it.

Since the bond market is much larger than the stock market, an intensification of the turbulences there would be much more far-reaching than a stock market crash!

For this @PK in a comment on FMN:

“Look further at the rise in interest rates at the long end in the USA! That will be exciting. In my opinion, the most important aspect now is confidence in the bond markets, everything else is peanuts. Are they going to falter?”

At present, the risk premiums of Italian bonds (spreads) over German bonds in particular are rising sharply.

Meanwhile, Germany has reduced the capital buffers required by banks from 0.25% to 0.0%. This will apply until the end of 2020, releasing around five billion Euros in liquidity.

The “Sueddeutsche” reports that Merkel will give a speech to the nation today.

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