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March 23, 2020

Senate Fails to Pass Stimulus Bill Causing Rates to Fall

 

Senate fails to pass stimulus package. Democrats voted against a second stimulus bill in the Senate -characterizing the bill as a "large corporate bailout " that fell short of meeting the funding needs of local governments and consumers. The urgency for further stimulus continues to grow as US states increase their containment efforts of the novel coronavirus with nationwide cases rising past 14,000 -- Delaware, Louisiana, and Ohio becoming the latest states to mandate a lockdown. The rapid spread of cases coupled with delay in Congress rattled markets this morning, with US futures, global stocks, and oil prices plummeting. Prices for safe haven assets rose, pushing the 10-year Treasury yield down to 0.802%.

 

 

TThe Fed has announced an expansion of its lending programs this morning. Last week, the Fed announced an increase in purchases of Treasury bills and mortgage backed securities. The Fed confirmed that these purchases are unlimited - the Fed buying $375 billion in Treasurys and $250 billion in MBS just this week. Three other lending facilities will also be set up, including the Term Asset-Backed Securities Lending Facility which was used in 2008 to support credit marks for consumers and businesses. The other lending facilities will support corporate credit markets -- one for lending to investment-grade companies and the other to buy corporate bonds from well-rates firms. These three facilities will total $300 billion in new financing coupled with the Treasury Department's pledge to cover $30 billion in losses. The Fed backed their actions by saying "aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate."

 

 

Day ahead. The US Senate will vote on a $1.3 trillion stimulus package. The White House will hold their daily briefing of the virus this evening.

 

 

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