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May 19, 2020

Treasury Yields Rise Dramatically Despite Increased US-China Tensions

On Monday, US stocks surged on hopes of a virus vaccine. Before the market open, Moderna Inc. announced that their phase one trial for vaccine mRNA-1273 was a success after all 45 participants developed antibodies. White House economic advisor Larry Kudlow cheered the developments, adding that he believes things are starting to turn for the US economy. Major indices rose with the news, the Dow Jones and S&P 500 closing 3.9% and 3.2% higher respectively. Treasury yields and swap rates rose dramatically across the curve – the 10-year closing up over 8 basis points at 0.72% and is trading...

May 18, 2020

News of a Potential Virus Vaccine Pushes Risk Assets Higher

S&P 500 and DJIA open up 3% this morning with news of a potential vaccine. After conducting its phase one human trial, Moderna Inc. reported that antibodies were produced in all 45 participants who received a vaccination with mRNA-1273, rendering the experiment a success. Moderna chief medical officer Tal Zaks concluded that “these data substantiate our belief that mRNA-1273 has the potential to prevent COVID-19 disease and advance our ability to select a dose for pivotal trials.” Dow futures surged 3.24% with the news. Treasury yields have continued Friday’s rise – the 10-year...

May 15, 2020

Treasury Yields Fall as US-China Tensions Rise

Major indices close at session highs despite weak data. The weekly initial jobless claims report highlighted yesterday’s key economic data releases, revealing 2.981M more Americans filed for unemployment. The numbers have remained elevated since mid-March, with the total rising to 36.5M jobs lost. Minneapolis Fed President Neel Kashkari commented on the growing unemployment during his speech by adding that an economic rebound may be more drawn out than originally anticipated, echoing the sentiments of Fed Chair Jerome Powell. Kashkari added with finality that a "V-shaped recovery is off...

May 14, 2020

Equities Fall as Powell Warns Economic Rebound May Be Slower than Expected

Risk assets fall as Powell shares grim economic outlook.  During his speech Wednesday morning, Fed Chair Jerome Powell raised concerns as he announced economic regrowth could happen slower than expected.  A slower growth rate and consistent joblessness may mean that economic recovery may not be in the much-anticipated "V" shape.  He added, "The scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II."  He remained consistent with the sentiments of his colleges, announcing the Fed will not lower rates into...

May 13, 2020

Treasury Yields Fall as Fauci Warns Reopening Economy Could Lead to Another Outbreak

Risk assets fall as Fauci tempers optimism on reopening in testimony before Congress. In his remarks to the Senate yesterday, Dr. Anthony Fauci warned that a COVID-19 a vaccine would not be distributed until the late fall at the earliest, and that reopening the economy too early could lead to "little spikes” in infections “that might turn into outbreaks." The DJIA and S&P 500 would ultimately close down 1.9% and 2.1% respectively- erasing earlier gains while the S&P Bank Index underperformed the broader market by nearly 2%. Treasury yields and swap rates followed risk assets lower...

May 12, 2020

US Core CPI Drops 0.4% in April

Consumer prices experience largest monthly drop since 2008. This morning the US Labor Department reported that April CPI fell 0.8%, the biggest decline since the 2008 financial crisis. Falling gas prices led the decline as crude plunged 21% last month, largely due to the 1) price war between Saudi Arabia and Russia and 2) pandemic-induced demand shock. The airline industry also continues to suffer, with the report revealing a 15% drop in passenger fares. Y/Y core CPI growth (excluding food and energy) slowed to +1.4% from 2.1% in March. Acknowledging the potential for...

May 11, 2020

Treasury Yields Open Lower After International Uptick in Virus Cases

Rates and U.S. equities start the week on a soft note after strong session on Friday. Rates grinded higher on Friday despite a historically bad jobs report, the 10-year ultimately climbing 6 basis points to close at 0.68%. This morning, growing optimism around the reopening of the US economy was tempered somewhat by news of increased infections in Wuhan after the Chinese city relaxed its strict quarantine last month. South Korea also reported its sharpest uptick in cases in more than a month, threatening the easing of social distancing measures in the country lauded as the...

May 8, 2020

Treasury Yields Mixed After Historic Jobs Report

Nonfarm payrolls report reveals worst unemployment rate since Great Depression. This morning’s jobs report was widely expected to be the worst in history and did not disappoint. Unemployment rose to 14.7% in the month of April- the highest jobless rate since the Great Depression. Over 20.5mm workers lost their jobs last month, disproportionately lower earners, which helped hourly wages jump to 4.34%. The unemployment rate was better than some forecasts that had called for a 25% jobless rate, but that was likely due to a steep decline in labor force participation. One...

May 7, 2020

Treasury Yields Mixed Amid Weak Employment Data

Coronavirus pandemic continues to wreak havoc on the jobs market. Often a leading indicator to the Labor Department’s comprehensive jobs report, the ADP National Employment Report published yesterday showed 20.2M jobs lost in April in the US private sector, the report’s worst reading since the survey started 18 years ago. Tomorrow’s payroll release is expected to be equally as grim, with median forecasts pointing towards a 21 million decline in nonfarm payrolls and the unemployment rate surging to 16%. This morning, the Labor Department released their weekly jobless claims...

May 6, 2020

Treasury Yields Rise as States Continue to Reopen

Equities ended Tuesday’s trading sessions higher as states continue to reopen. California Governor Gavin Newsom revealed initial plans to ease lockdown restrictions throughout the state. Fed Vice Chair Richard Clarida spread further optimism throughout markets as he forecasts economic recovery could begin in the second half of the year, indicating that a “V” recovery might be around the corner. This news was enough to offset increased US-China tensions, as President Trump announced during morning comments that he has not spoken with President Xi and has called for increased international...

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