COVID‑19 Market Update


Quick read: 3 things to know

  • Oil prices surged after a surprise tweet from U.S. President Trump appeared to indicate a potential agreement between Saudi Arabia and Russia to cut oil production. Brent crude experienced its largest one-day percentage gain as prices rose 21% to $29.94 / barrel. As a result, the energy-related names performed well across equities, credit and EM
  • Job losses accelerated around the world as a record 6.6 million new claims were filed for unemployment benefits in the U.S., bringing the two week total to 10 million Americans (the metric had previously not passed 700,000 going back to the 1960s). In France, 4 million workers (~20% of the private sector) also filed for temporary unemployment benefits over the past two weeks
  • Equity markets gained today in Europe and the U.S., driven in part by the potential for oil production to decline even as coronavirus cases surpassed 1 million globally

A more detailed recap

What happened? Market sentiment generally improved after a surprise tweet by U.S. President Trump appeared to indicate a potential agreement between Saudi Arabia and Russia to cut oil production. Brent crude oil prices rose meaningfully, up nearly 50% intraday before ending 21% higher at the close. Meanwhile, signs of economic stress continued to emerge with a record 6.6 million Americans filing for unemployment – bringing the two-week total to 10 million. A similar trend occurred in Europe, with 4 million French citizens applying for benefits in the past two weeks (or approximately a fifth of the private sector)

  • Equities finished mixed in Asia, generally higher in Europe, and higher in the U.S. despite the number of worldwide coronavirus cases hitting 1 million. The S&P 500 rose 2.3% with energy leading the U.S. market higher on hopes for an end to the crude oil price war
  • Rates in the U.S. rose modestly alongside the equity rally, though were anchored by concerns of a worsening global economic outlook. Globally, rates were relatively mixed across regions – with rates modestly lower inv Japan, but mixed along the curve in the eurozone and the U.K.
  • Credit markets were mixed today on lower volumes, although primary activity in both the IG and HY market were robust. T-Mobile priced its $19bn deal to finance its Sprint merger, along with 9 other new IG deals. In high yield, three new issues were also launched after a historically slow March. Energy credits broadly performed well due to a U.S. Presidential tweet suggesting that OPEC members had agreed to production cuts
  • Agency MBS spreads tightened 8bps in a relatively muted day in Agency markets
  • EM broadly was resilient with significant dispersion across issuers: oil exporters led the rally across assets with PEMEX a particularly strong performer, even though spreads were unchanged at the aggregate level. The Russian ruble gained 1.9% and South Africa, an oil importer, was the day’s underperformer. Spreads widened by 25bps and the Rand depreciated by 1.3%
  • Oil prices (Brent crude) closed up 21% to end at $29.94 / barrel, the largest single-day percentage gain for the contract in history.  With expectations for a coordinated supply cut among large producers, President Trump reportedly spoke with Saudi officials in an attempt to coordinate a production agreement
  • Breakeven inflation rates in the U.S. moved higher with the 10yr rate settling at 1.03%, 13bps higher on the day driven by the rally in oil prices.

As always, there is nothing more important to us than our partnership with clients, and we stand ready to support you. Please don’t hesitate to reach out with any questions. You can also visit our Market Volatility site for PIMCO’s latest insights and resources to help you make sense of the market environment.

Sources: Bloomberg; US IG Spreads: Bloomberg Barclays US Agg; US Credit Spreads: Bloomberg Barclays US Agg Credit; US HY Spreads: Bloomberg Barclays HY US Corporate; EM equities: MSCI EM; EM debt: JPM EMBI; Munis: Bloomberg Barclays Municipal Bond


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All information as of 2 April 2020 unless otherwise noted

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