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August 12, 2020

Rates Gap Higher Despite Stimulus Stalemate

Rates jumped higher despite stimulus talks reaching a stalemate.  After Democrats and the White House met last Friday, stimulus talks have yet to resume.  Senate Majority Leader Mitch McConnell commented, "I think it's time for everybody to get back to the table, and let's get a deal done."  Risk assets got off to a hot start with news of the new Russian virus vaccine but lost stream closer to the end of the day.  The S&P ended a seven-day streak, falling 0.8% on the day.  The DJIA and Nasdaq also fell 0.4% and 1.7%.  Treasury yields and swap rates rose dramatically on...

August 11, 2020

Congress Hopes to Reach Stimulus Deal by End of Week

Rates rise as Congress continues to discuss virus bill. With Congress failing to reach a decision over the weekend, Democrats and the White House have set a new deadline. Treasury Secretary Mnuchin commented, "If we can get a fair deal, we'll do it this week." Due to the delay, President Trump signed four executive orders to expedite measures like unemployment benefits and eviction protections, but his decisions have raised concerns from various state leaders like California’s Governor Gavin Newsom who believe states do not have the sufficient funding to cover the costs....

August 10, 2020

Equities Open Higher as Stimulus Timeline Remains Uncertain

Equities open higher despite the uncertain timeline for the stimulus package. Congress has not yet agreed on a bill, prompting President Trump to sign executive orders over the weekend for virus relief. With Republicans and Democrats still grappling with key issues and US coronavirus cases passing 5 million, risk assets open higher -- the S&P 500 closing up 0.1% on Friday. Treasury yields and swap rates rose moderately across the curve on Friday and are trading 1-2 bps lower this morning.

August 7, 2020

Falling Unemployment Rate Pushes Rates Moderately Higher

Jobs report beats expectations, payrolls rising more than expected while wages climb. This morning’s nonfarm payrolls report showed the US added 1.8M jobs in July vs estimates that had called for an increase of 1.5mm. Wage growth also surprised to the upside, earnings rising 0.2% month-over-month against forecasts that had called for a decrease of 0.50%. Finally, the unemployment rate fell to 10.2% from 11.1%, though it came amid a drop in labor force participation. Job gains came mainly in the hospitality, government, retail, professional, and health care industries – all...

August 6, 2020

Equities Rise to Near Record Highs as Congress Hopes to Strike a Deal by the End of the Week

Risk assets rise as Congress nears next stimulus deal. News that Congress hopes to strike a deal by the end of the week pushed major indices higher. The S&P 500 closed just 2% shy of its record high hit in February, rising 0.6% on the day. Pulled higher by big gains in Walt Disney shares, the DJIA close 1.4% higher. The Nasdaq rose 0.5% to hit another record high, marking its 31st record close this year. Spot gold continued its rise, trading up 0.9% to hit another all-time record. Treasury yields and swap rates rose across the curve yesterday, but are trading 2-4 bps...

August 5, 2020

Rates Close Near All-Time Lows as Congress Continues Stimulus Negotiations

Rates fall to record lows, haven assets rise as next round of stimulus remains in limbo. Swap rates and Treasury yields fell dramatically across the curve as investors fled to haven assets. 5-year and 7-year Treasury yields fell to all-time lows at 0.19% and 0.36% respectively while the 10-year fell to 0.54%. Despite the dramatic rally, interest rate volatility remains suppressed- the MOVE Index sitting near YTD lows at 44.1. Gold, another haven asset, rose dramatically- closing above $2,000/ounce at all time highs. US equities paradoxically ended higher as well- the S...

August 4, 2020

Rates Rise as Manufacturing Activity Rebounds

Rates rebound off all-time lows despite continued gridlock in stimulus negotiations. Enhanced unemployment benefits remain a sticking point in negotiations between Congressional Democrats and Republicans- the Trump administration now suggesting that they may extend unemployment benefits themselves if Congress doesn’t come to an agreement shortly. The Senate will recess beginning on Friday, the same day nonfarm payrolls data will be released. Despite the pessimistic news flow, rates rebounded after last week’s rally- the 10-year Treasury yield climbing to 0.55% while...

August 3, 2020

Rates Fall Across the Curve as Virus Concerns Rise Again

Rates and futures both climb despite expiration of unemployment benefits. Enhanced unemployment benefits expired over the weekend with Congress unable to strike a deal on an extension of the $600/week unemployment stipend. Covid-19 cases continue to surge in the US, Minneapolis Fed President Neel Kashkari suggesting over the weekend that another "hard" lockdown may be necessary to curb the infection rate. Despite the bevy of concerning news rates are 3-5 basis points higher across the curve, equity futures pointing towards a higher open as well.

July 31, 2020

Rates Fall After Jobless Claims Rise for Second Consecutive Week

Rates fall amidst weak economic data. Yesterday, the Labor Department reported a rise in initial jobless claims for the second week in a row at 1.434 million. The figure had fallen for almost 4 consecutive months but has recently begun to rise once again. The Commerce Department also reported that GDP shrunk 32.9% in Q2, the sharpest contraction in US history. Equities bounced after their lows after Apple, Alphabet, Amazon, and Facebook reported blockbuster earnings reports. According to Bloomberg, the value of the top five firms in the S&P 500 rose 266% in the past...

July 30, 2020

Rates Are Lower as Fed Unanimously Votes to Leave Benchmark Rate Near Zero

Fed not “thinking about thinking about thinking about raising rates”. Yesterday the Fed concluded its policy meeting with the unsurprising decision to leave benchmark rates near zero and commit to “do what we can, and for as long as it takes”. In the press conference following the announcement, Fed Chair Powell reinforced several times that any form of monetary tightening is not even close to being contemplated. The FOMC statement tied the future of the US economy closely to course of the COVID-19 virus, and Powell continually highlighted the need for fiscal support....

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