The Wall Street Journal - 19.03.2020

A10| Thursday, March 19, 2020 ** THE WALL STREET JOURNAL.

Jim Rosenberg, an American

aboard the ship.

A State Department official

said Tuesday the department

was “considering all options to

assist U.S. citizens” in countries

that have suspended air travel.

The official urged Americans

abroad to consult the State De-

partment’s travel advisories and

Covid-19 updates. The official

wouldn’t provide information on

the number of U.S. citizens af-

fected by travel restrictions

abroad and declined to say

whether aircraft would be char-

tered to fly Americans home.

Nine Democratic members of

the Senate Foreign Relations

Committee wrote to Secretary of

State Mike Pompeo on Wednes-

day expressing “urgent concern”

for U.S. citizens stranded abroad

amid the pandemic, saying

Americans in Honduras, Mo-

rocco, Peru and Tunisia have

struggled to make contact with

or receive assistance from U.S.

embassies in those countries.

The lawmakers asked Mr.

Pompeo to detail his depart-

ment’s efforts to facilitate the

return of Americans to the U.S.

via commercial or government-

chartered flights, and to aid

those unable to do so.

Some countries already have

rescue plans in motion. Ger-

many has committed up to €

million ($54 million) to charter

planes from several carriers in-

cluding Lufthansa, Condor, and

TUI to begin shuttling more

than 100,000 German tourists

trapped in popular vacation

spots such as Greece and the

Dominican Republic. Israel is

sending two planes from its

state carrier El Al to rescue Is-

raeli tourists in Peru, according

to Israel’s Foreign Ministry.

American Tessa Matsis Smith

and nine friends from Oregon, at

a hotel in Marrakesh, Morocco,

think it is time the U.S. govern-

ment stepped in. Two days ago,

they returned from a night in

the desert to be told by the ho-

tel manager that the city was

going into lockdown. They called

the U.S. Embassy and were told

LUKA GONZALES/AGENCE FRANCE-PRESSE/GETTY IMAGES

their way back.
Ms. de Chabert-Ostland, who
is stuck in Peru, is a 49-year-old
Connecticut second-grade
teacher with three children at
home. She said she has already
been away since March 8 and
unless something changes fast,
it won’t be until April that she,
her mother and niece will be
able to leave. For now, their
home is a hotel a short walk
from the main square in Cusco,
now filled with Americans.
In Africa, Elizabeth Dea, 53,
from Los Angeles, canceled her
Botswana safari and headed to
Johannesburg, trying to get a
flight. In Europe, Scott Rose, a
32-year-old student of Spanish
and English literature, didn’t
want to take one of the last
flights home to the U.S. from
Spain because of the high cost
of a ticket as growing numbers
of Americans flew out. He is
hunkered down, reading books
that he always meant to finish,
like Oscar Wilde’s “The Picture
of Dorian Gray.”
In Honduras, a group of 55
football players and staff from
around the U.S. had just won a
tournament when they found
out they were stuck.
“Being on a high and then
finding out that the Honduras
government closed the border
from in and out travel was frus-
trating,” wrote Sandy Glossen-
ger, the group’s operations man-
ager, in an email. But she added:
“Morale is good and we are
safe.”
Alison Clay-Duboff and her
husband, Ken Duboff, have
found themselves in the middle
of the Peruvian Amazon with in-
termittent telephone service,
and Americans on a cruise ship
off the coast of Chile were being
prevented from getting off.
“We are living in a celestial
bubble in the midst of the horri-
ble world-wide situation,” said

ContinuedfromPageOne

THE CORONAVIRUS PANDEMIC

sharply that exchanges had to

temporarily halt trading in

them. One such stock,Alaska

Air GroupInc., declined 23%

Wednesday. Olive Garden

owner Darden Restaurants

Inc. slid 19%.CotyInc., whose

beauty portfolio includes Sally

Hansen, dropped 31%.

In debt markets, the sell-ev-

erything approach drove down

prices of safe investment-grade

bonds and government debt

alongside stocks and commodi-

ties of nearly all stripes. Nor-

mally, when investors turn

away from risky assets, they

buy safer government debt—or

if they are really frightened,

gold. Investors appear to be

putting their trust in only the

shortest-term government

bonds or cash.

“When even silver and gold

are getting crushed, that’s a

panicked drawing of liquidity,”

said Rob Arnott, founder of

California-based investment

firm Research Affiliates. “In

the U.S., you can’t find toilet

paper anywhere: This is the

capital markets equivalent of

that.”

Yields on one-month U.S.

Treasury bills, a close equiva-

lent to cash, fell to as low as

-0.033% from 0.31% at the start

of the week, their lowest level

in several years.

“There are very few places

to hide. The tightening in fi-

nancial conditions is happen-

ing across markets,” said Niko-

laos Panigirtzoglou, global

markets strategist at JPMor-

gan Chase & Co. He pointed to

strong selling of bond funds

that own the debt of the safest

big companies, which is caus-

ing corporate borrowing costs

to rise despite central-bank ef-

forts to do the opposite.

Another factor pushing gov-

ernment-bond yields higher:

As investors dash for safety,

they are contending with a po-

tential massive new supply of

government bonds that will be

necessary to fund stimulus

measures, including $1 trillion

of spending discussed in

Washington on Tuesday. In the

simplest terms, a greater sup-

ply of bonds should cause

prices to fall and yields to rise.

The rush to cash, mean-

while, has put strain on money

markets in the U.S. and glob-

ally. The difference between

the yield on the three-month

Treasury bill and interbank

lending rates, known as the

Ted spread, jumped above 1

percentage point, according to

FactSet, a level not seen since

early 2009. In good times, the

difference between the rates,

which reflects how easy it is

for banks to get hold of short-

term borrowing, is negligible.

People and companies need

cash to cover rent, bills and

other fixed costs at a time

businesses and schools are

closing and sending staff home

in the U.S. and Europe to halt

the spread of the coronavirus.

“If you think about it from a

small-business standpoint, a

big-business standpoint, a

fund-manager standpoint, li-

quidity and cash [are] going to

be king,” said John Briggs,

head of strategy, Americas, at

NatWest Markets. “Take Italy:

They’ve just hard-stopped the

eighth-largest economy in the

world. We’ve never seen any-

thing like this.”

This has led a wave of com-

panies including Boeing,Hil-

ton Worldwide HoldingsInc.,

Kraft Heinz Co. and An-

heuser-Busch InBevSA, to

draw down billions of dollars

from credit facilities. The Fed-

eral Reserve has had to step in

and support the smooth func-

tioning of the commercial-pa-

per market, where companies

can borrow short term, be-

cause huge demand there has

met diminishing supply from

money-market funds and oth-

ers that are preparing to face

their own cash withdrawals,

according to analysts.

The Bank of England said

Wednesday it would provide an

unlimited amount of financing

in commercial-paper markets.

Small and medium-size

companies in the U.S. and Eu-

rope are likely to be among the

hardest hit because they have

less room for error. Eric Lon-

ergan, a portfolio manager at

M&G Investments, said smaller

companies in the U.K. were al-

ready delaying payments to

their creditors if they could.

“I think the entire economic

system is trying to conserve

cash at the moment,” he said.

Sushil Wadhwani, chief in-

vestment officer of QMA Wadh-

wani, a U.K.-based hedge fund,

said the rational thing for indi-

vidual companies was to access

credit lines. Pension funds,

meanwhile, which are normally

built to ride out long market

disruptions, might also be join-

ing the cash dash. “For pension

funds, it is sell anything you

can sell to build up reserves so

you can tell your trustees that

you have enough cash to pay

pensions over the next nine or

10 months,” he said.

shares of companies as varied
as airlines, restaurants, banks
and retailers. The declines
showed the extent to which in-
vestors are worried that the
coronavirus pandemic—which
has already forced airlines to
cut flights and businesses to
close—could send the economy
into a recession.
Shares ofBoeingInc. fell
18%, while stock inCitigroup
lost nearly 10% in value. A
drop of more than 20% in the
price of oil slammed shares of
energy companies.Exxon Mo-
bilInc. fell 10% and has halved
so far this year.
Several stocks fell so

ContinuedfromPageOne

Markets

Rattled by

Cash Rush

the country’s borders would

close Friday. They were unable

to find airline tickets home.

“It was overwhelming, the

thought that we could not get

home, it was hard to breathe,”

said Ms. Smith, a hair stylist.

Now the 10 friends are confined

to the hotel, unable to even use

the pool.

“None of us are sick with the

virus,” she said. “We just need

to go home.”

Daniel Villarreal, a 52-year-

old Texas psychiatrist who is

also stranded in Cusco, found

himself in long lines for water,

tuna, peanut butter and jelly. He

had arrived with his teenage

daughter to take her to Machu

Picchu. Instead, he was stocking

up on medicine.

“We never thought we could

end up trapped here,” Mr. Villar-

real said. “The measures the Pe-

ruvian government have taken

are pretty draconian. Zero

movement, all the restaurants

are closed.”

He said he has sent messages

to his senators in Texas and

reached out to the U.S. Embassy

in Lima, but hasn’t received a

response. “This is day one, and

one of our concerns is if there

are going to be enough supplies

coming around for day 4, 5, 10

and 15,” he said.

Just a few blocks away, Ms.

de Chabert-Ostland is worried

because her mother, Ms. Bravi,

suffered a fall and has a swollen

ankle.

That wasn’t the way the trip

was supposed to go. The idea

was for Ms. Bravi—with her

daughter and granddaughter—

to enjoy an exotic locale, among

others she hopes to visit as part

of her “bucket list.” And as of

Monday, the trip had been mem-

orable, exploring the Inca ruins

of Machu Picchu, the Sacred Val-

ley and then a trip to Lake Titi-

caca on Monday.

But by the end of that day,

the three were in their hotel in

Cusco, unsure when they would

get out. “Quarantining us here,

without explanation—without a

true explanation of when we’ll

get home—is an awful feeling,”

Ms. de Chabert-Ostland said.

—Ellie Miller

and Aaisha Dadi Patel

contributed to this article.

FRANKFURT—The Euro-
pean Central Bank unveiled a
new €750 billion ($818.7 bil-
lion) bond-buying program
aimed at shielding the euro-
zone economy from the
spreading coronavirus, casting

aside longstanding taboos to
send a determined signal to
investors that the bank will
stand behind the region’s em-
battled governments.
The unexpected move, fol-
lowing days of delay and
mixed messages from the ECB,
underscores the high level of
urgency among policy makers
in Europe, which has emerged
as the new center of the fast-
moving global crisis.
Borrowing costs for South-
ern European countries have
jumped in recent days, reflect-
ing concerns that the region’s
governments might struggle to
meet their obligations as
spending demands increase.
That has revived memories of
the eurozone debt crisis nearly
a decade ago.
While analysts cheered the
ECB’s move, it could raise fresh
concerns in the region’s largest
economy, Germany, where offi-

cials have long worried about

overreach by the ECB.

In a statement, the bank

said it would buy €750 billion

of public- and private-sector

assets at least through the end

of the year, and possibly be-

yond. The purchases—dubbed

the Pandemic Emergency Pur-

chase Program—will include

Greek government debt, which

was excluded under earlier

ECB bond-buying programs.

The decision came during an

unscheduled late-night confer-

ence call among top ECB offi-

cials, on a day when borrowing

costs for governments like Italy

and Spain jumped as the virus

roiled and shuttered the region.

“This looks like a game-

changer for the euro area

economy and markets,” said

Frederik Ducrozet, an econo-

mist with Pictet Wealth Man-

agement in Geneva.

It means the ECB will be

able to buy almost €120 billion

a month of eurozone debt for

the rest of the year—the larg-

est amount ever. Under the

rules of the program, the ECB

could focus its purchases in

the short-term on Italy and

other struggling governments.

“It sends a very, very strong

signal to markets,” said Torsten

Slok, chief economist at

Deutsche Bank Securities in

New York. “This is the bazooka.”

The decision marks an

about-turn for the ECB, which

had dragged its feet for weeks

about the need for aggressive

monetary stimulus, even as ma-

jor central banks like the Fed-

eral Reserve announced deep

interest-rate cuts and other ac-

tions to help combat the virus.

Last Thursday, ECB Presi-

dent Christine Lagarde stressed

at a news conference that the

bank was “not here to close

spreads,” suggesting it wouldn’t

intervene to narrow the differ-

ence in borrowing costs be-

tween Germany and Italy.

That comment stunned in-

vestors, and the ECB quickly

sought to walk it back. The in-

cident called into question the

ECB’s carefully crafted role as

an effective lender of last re-

sort to eurozone governments.

The ECB is prohibited under

European treaties from financ-

ing governments, but Euro-

pean courts have supported its

right to use bond purchases to

calm markets.

As Italy’s sovereign debt

came under pressure this

week, however, the ECB inter-

vened in the market via the

nation’s central bank, accord-

ing to a person familiar with

the matter. It also sought to

redirect remarks by senior of-

ficials suggesting that the bank

would take no further action.

“It has intervened in a flexi-

ble but intense way due to the

volatility of markets,” the per-

son said.

The ECB declined to com-

ment.

In a confusing twist

Wednesday, Austrian central-

bank Gov. Robert Holzmann

suggested in an interview that

investors were right in assum-

ing that the ECB would do little

more to support the economy.

He even suggested that a

downturn in Europe might

have a positive, cleansing ef-

fect on the economy by elimi-

nating businesses that aren’t

viable. “One should be careful

that only the firms capable of

surviving do survive, and that

others that would have failed

even without a crisis don’t

survive,” Mr. Holzmann said.

A spokesman for Mr. Holz-

mann declined to comment fur-

ther on his remarks, which

prompted a swift response from

the ECB. The bank said its top

officials were united in their

desire to use all their tools to

support the region’s economy.

Still, Italy’s 10-year govern-

ment bond yield rose above

3% on Wednesday for the first

time in more than a year, as

investors worried that the ECB

wouldn’t step in to support

Rome. The Greek equivalent

traded above 4.1%, compared

with less than 1% several

weeks ago.

“This is the perfect storm,”

said James Athey, an invest-

ment manager at Aberdeen

Standard Investments. “Li-

quidity has essentially evapo-

rated, the BTP [Italian govern-

ment bond] market has

essentially broken today.

There are basically no bids

and a lot of sellers.”

On a conference call with

European Union leaders on

Tuesday, Ms. Lagarde said the

eurozone economy would likely

contract by 1.3% this year if

business shutdowns lasted for

one month and shrink by

around 5% if the shutdowns

lasted three months, according

to a person familiar with the

matter. The latter would repre-

sent a fiercer downturn than

the financial crisis.

In its statement late

Wednesday, the ECB suggested

it might alter self-imposed lim-

its on its bond-buying program,

breaking a longstanding taboo.

That would potentially give the

bank room to buy more than a

third of the outstanding debt of

governments like Italy. It could

also raise legal concerns in Ger-

many, where the ECB has faced

multiple lawsuits over its bond

purchases.

ByTom Fairless,

Anna Hirtenstein

andGiovanni

Legorano

ECB Unveils Surprise Bond-Buying Plan

Americans

Stranded

Abroad

Pedestrians were asked why they were on the streets in Lima on Tuesday. Travelers waited for the last flights out of Peru on Monday.

SEBASTIAN CASTANEDA/REUTERS

European Central Bank President Christine Lagarde

ALEX KRAUS/BLOOMBERG NEWS