The spread between high-grade corporate debt and its 10-year Treasury counterpart rose Monday to its highest levels since 2015. The year-to-date return of the S&P 500 sunk to 12.4%, dragged lower by the mounting number of COVID-19 cases, which now stand at more than 110,000, and a collapse in oil prices as Russia and Saudi Arabia prepare for a price war. While the S&P 500 was down 5% by midday Monday, the New York Stock Exchange was forced to pause trading earlier in the day after its -7% circuit breaker was tripped.
Spreads jump on oil and COVID-19
A barrel of Brent crude was trading for about $33 midday Monday, down from $41 at Friday's close and $61 at the start of the year.
The dramatic shift in yields and equities could dig deep holes into institutional investor and retirement account assets alike. Yield declines will offer some offset to equity losses as fixed-income investments appreciate, however, lower discount rates will also increase liabilities for pension and insurance portfolios.