US market review: US rates fall to near-zero

Share prices fell sharply in the US during March as the coronavirus pandemic continued its spread, and the yields on ten-year and 30-year Treasury bonds fell to all-time lows. President Donald Trump declared a national emergency and the Senate passed a coronavirus aid bill worth US$2 trillion.


  • The Fed cut rates to a range of 0% to 0.25%
  • Every S&P industry sector ended March in negative territory
  • Eight major US banks suspended buyback activity

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Share prices fell sharply in the US during March as the coronavirus pandemic continued its spread, and the yields on ten-year and 30-year Treasury bonds fell to all-time lows. President Donald Trump declared a national emergency and the Senate passed a coronavirus aid bill worth US$2 trillion. The package included direct payments of US$1,200 to adults earning US$75,000 or less, with US$500 for each child, alongside additional unemployment aid, help for businesses, and US$100 billion-worth of health care spending. By the end of March, the World Health Organisation (WHO) reported 140,640 cases of Covid-19 had been diagnosed in the US, with 2,398 deaths recorded.

“The Fed implemented two consecutive emergency cuts in interest rates”

The Dow Jones Industrial Average Index dropped by 13.7% in March, and by 23.2% over the first three months of the year. Meanwhile, the S&P 500 Index fell by 12.5% during March, and by 20% over the first quarter and the Nasdaq Index declined by 10.1% over the month and by 14.2% over the first quarter.  During March, every S&P industry sector ended the month in negative territory. The worst-performing sector was energy, which fell by almost 35%, followed by financials and industrials, which dropped by 21.5% and 19.3% respectively. The best-performing sector was health care, which fell by only 4%.

Eight major US banks issued a joint statement announcing that buybacks would be suspended until the second half of 2020, and promised to use their “significant” capital and liquidity to support businesses and individuals. According to S&P Dow Jones Indices, suspensions of buybacks were running at 25% of 2019 buybacks at the end of March, with suspensions in the financials sector reaching 72%. Looking further ahead, the buyback outlook for the second quarter is described as “dismal”.

During March, the Federal Reserve (Fed) implemented two consecutive emergency cuts in interest rates, bringing down the key federal funds rate to a range of 0% to 0.25% in a bid to shore up the economy. The federal funds rate has not been so close to zero since 2008. The central bank also extended its programme of asset purchase.

The nomination process for the Democratic Party’s presidential candidate was disrupted by the virus. Former Vice President Joe Biden remained the front runner, ahead of Bernie Sanders; the nomination process finishes in July and the US election is scheduled to take place in November.


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