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June 26, 2020

Risk Assets Start the Day Lower as Virus Infections Continue to Spread in Southern States

Rates and risk assets fall sharply to start the day as markets continue to trade on COVID-19 headlines. Treasury yields and swap rates are 2-5 basis points lower across the curve as COVID-19 infections continue to accelerate in hotpots like Texas and Florida. The CDC believes that the rising numbers may not even accurately reflect current conditions with researchers estimating only one in every ten COVID-19 cases is currently being recorded. CDC Director Robert Redfield added, "This outbreak is not over. The pandemic is not over. Greater than 90% of the American public...

June 25, 2020

Risk Assets Fall as Virus Cases Continue to Rapidly Rise

Rates and risk assets fall as COVID-19 spread weighs on recovery hopes. Multiple states reported record daily increases in COVID-19 infections- spooking equity markets- the S&P 500 and DJIA declining 2.6% and 2.7% on the day respectively. Speculation around an increase in lockdown measures (and conversely a fall in economic activity) led bonds higher as well- yields falling across a flattening curve. The 10-year Treasury yield would ultimately close 3 bps lower to 0.68% while the spread between 2-year and 10-year yields fell to 49.1 basis points. This morning, rates...

June 24, 2020

Rates Trade Sideways as South Remains Virus Hotspot

Equities continue to march higher despite the virus spikes. Extending their gains for another day, a tech rally pushed the S&P 500 and DJIA to close higher by 0.4% and 0.5% respectively. The Nasdaq hit an all-time high as investors banked on continued economic improvement. Gold rallied to $1,770, finishing at its highest peak since 2012. Conversely, the dollar experienced a broad selloff throughout Tuesday's session, with the EUR/USD hitting a weekly high of 1.1350 after the eurozone PMI reading came in stronger than expected. Treasury yields and swap rates continued...

June 23, 2020

Risk Assets Rise as the Market Adopts Wait-and-See Attitude

Risk assets move higher as uncertainty surrounding a speedy economic recovery lingers. The wait-and-see attitude controlled much of Monday's trading session as conflicting information from the White House and state governments poured into the market. Despite cases continuing to rise exponentially in numerous states, White House Advisor Peter Navarro stated that the administration does not "necessarily expect a second wave." Conversely, Texas Governor Greg Abbott said "additional measures are going to be necessary" if cases continue to rise at the current rate. Investors...

June 22, 2020

Rates Grind Lower as New COVID-19 Infection Rates Remain Elevated

Rates continue to grind lower, risk assets trade sideways as COVID-19 infection rates remain in foreground. Rates continued to decline from their recent peak- Treasury yields and swap rates falling across the curve on Friday and this morning as virus cases continued to climb in parts of the U.S. Meanwhile, U.S. equities are set to rebound this morning after a 0.60% decline in the S&P 500 on Friday while gold (a popular haven asset) nears a multiyear high. Relatively quiet news flow over the weekend was highlighted by President Trump’s first major rally in many months-...

June 19, 2020

Treasury Yields Rise on Positive US-China Trade News

Treasury yields and swap rates rise with risk assets on positive US-China trade news. After muted price action yesterday, rates and US equity futures are both higher to start the day on reports that China will accelerate purchases of American farm goods in order to meet the targets set out in the “Phase One” trade deal. Looking ahead, today’s session could be a volatile one as index options and futures are set to expire and the S&P is set to rebalance its indices for the first time in six months after postponing the last rebalance in March. The once a quarter event...

June 18, 2020

Monetary and Fiscal Stimulus Remain in Focus as Coronavirus Fallout Continues

Fed Chair Powell sticks to script during the second day of his Congressional testimony. Powell reinforced the Fed’s commitment to backstop the economy using any/all tools available to the central bank (NIRP not among those tools), but cautioned that additional fiscal support may be required. He specifically highlighted that unemployment levels remain elevated despite the recent rise in payrolls.  A hot topic of discussion in the White House has been around potentially stopping the $600-a-week unemployment benefits after its scheduled end date in July.  Powell warned that...

June 17, 2020

Risk Assets Rise Despite Surge in COVID-19 Cases

Risk assets climb higher on surprise bounce in consumer spending. After plummeting in April, retail sales rebounded in May, rising the most on record at 17.7%. US equities jumped higher on the news, but gave back some gains as news of increased COVID-19 infections in Florida, Texas and China hit the tape. Stocks would still end the day higher- the S&P 500 and DJIA ultimately rising 1.8% and 2% respectively. Also moving markets yesterday was Fed Chair Jerome Powell’s testimony before Congress. In prepared remarks, Powell warned that economic recovery remains uncertain...

June 16, 2020

Rates Rise on Strong Rebound in Retail Sales

Treasury yields and swap rates bounce higher as Fed announces it will widen its asset purchases.  In Monday’s release, the Fed announced it will expand asset purchases from ETFs to individual corporate bonds (including new issues) under the Secondary Market Corporate Credit Facility.  The Fed described the move as a measure designed “to support market liquidity and the availability of credit for large employers.”  The Fed also began operations for their much-awaited Main Street Lending Program on Monday, allowing lenders to start registering. Treasury yield and swap rates...

June 15, 2020

Rates Start the Day Lower as COVID Cases Increase Globally

Rates and risk assets fall to start the day as COVID-19 cases surge domestically and abroad. After months of lockdown, multiple US states like Arizona and Oklahoma continue to report a surge in virus cases. The CDC's deputy director added, "If cases begin to go up again, particularly if they go up dramatically, it’s important to recognize that more mitigation efforts such as what were implemented back in March may be needed again." Meanwhile, Beijing also saw 80 new COVID-19 cases- the most significant surge in cases in China since the original outbreak earlier this year....

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