How the Market Rout Is Turning Wall Street Upside Down

Investors are flocking to U.S. Treasury securities.

At the Wall Street Journal:

The winners and losers on Wall Street are being upended.

After stock investors suffered a sharp decline last week and investors flocked to the relative safety of U.S. Treasurys, bonds are once again getting the upper hand, defying market sages who predicted tough times ahead in the vast debt market due to the prospect of rising interest rates.

U.S. Treasurys maturing in at least a decade have handed investors a total return of 3.2% this month through Friday, according to data from Barclays PLC. The S&P 500 lost 6.1% in the same period. Total return includes price gains and interest or dividend payments. Year-to-date, long-term Treasurys have returned 1.8% compared with negative 3% for the S&P 500. The last time bonds outperformed stocks over a full year was 2011.

The moves come as many investors rip up their playbooks for what might work for the rest of 2015. Fresh jitters about the global economy are giving U.S. government bonds an unexpected boost, once again wrong-footing investors who were convinced the three-decade-long rally in Treasurys was over. Gold and European bonds are also benefiting, while emerging markets and commodities bear the brunt of the selloff.

The scramble for the safety of Treasurys—amid broader financial-market turmoil spurred by worries about the slowdown in China—has sent the yield on the benchmark 10-year note back toward 2%, its lowest since April. Many traders and investors say it is likely to pierce that level if concerns persist.

The yield on the 10-year note dipped below 2% during early trading Monday in Asia as the region’s stock markets sold off broadly.

On Friday, the Dow Jones Industrial Average entered a correction, roughly defined as a drop of 10% from a recent peak, capping a tumultuous week in which global stock markets slumped and many emerging-market currencies hit record lows against the dollar. U.S. crude oil dipped below $40 a barrel for the first time since 2009, reviving worries about low inflation. The broad selloff in risk assets followed China’s decision to devalue its currency, triggering the yuan’s biggest fall in two decades.

Still more.

And from a few minutes ago, "Markets Rout Continues; China Shares Fall 8.5 Percent; Oil Hits New Lows."