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March 30, 2020

Fed Brainstorms Additional Aid Packages for Small Businesses and States

 

President Trump looks to the Fed for additional aid after signing a $2T stimulus package. After passing through the House on Friday, President Trump signed the $2T stimulus bill which includes tax breaks and direct payments to Americans impacted by the virus. The economic rescue legislation also asks the Fed to provide financing to businesses, states, and cities. Over the last two weeks, the Fed has created over half a dozen emergency lending programs to ensure the US financial system has enough liquidity. Fed officials have also begun deliberating new ways to support state and local governments as the outbreak and nationwide shutdown looks likely to continue through the end of April. Rates fell dramatically across the curve on Friday and are mixed today- the 10-year Treasury yield unchanged on the day at 0.67%.
 

 

Oil falls to $20.42/barrel as elevated production from Saudi Arabia and Russia continues. Helping to try and curb economic concerns, today the House formally voted in favor of the $2T stimulus package, with President Trump’s signature expected later this evening. This fiscal stimulus supplements the Fed’s recent actions - cutting their benchmark rate to zero, creating numerous lending programs, and signaling to the markets that "when it comes to this lending, we're not going to run out of ammunition. That doesn't happen." Despite these efforts, markets experienced high volatility yesterday as the US overtook China as the country with the most virus cases -- 85,991 confirmed infections with fatalities totaling 1,296. In debt markets, Treasury bill yields continued to set new record lows, as money market inflows spiked while the S&P 500 rose 6.2% capping the largest 3-day move since 1933. The 10-year Treasury yield ended yesterday near 0.84% and has traded 10 bps lower so far during today’s session.

 

 

Day ahead. US pending home sales, an indicator of existing home sales, is expected to rise 0.5% from the previous month in February. The Dallas Fed's manufacturing survey will be released shortly after. Atlanta Fed President Raphael Bostic will virtually speak to the National Association of Housing and Redevelopment this afternoon. The White House will hold their daily coronavirus press briefing this evening.

 

 

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