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March 24, 2020

US Treasury Yields Fall as Senate Fails to Pass Stimulus Package

 

Markets were rattled yesterday as the Senate failed to agree on a stimulus package. House Speaker Nancy Pelosi proposed a $2.5 trillion stimulus bill which includes supporting home owners and renters as well as student debt forgiveness up to $10,000. The House will not yet vote on these measures as they must be included in the Senate bill. Democrats voted against the bills proposed Sunday and Monday, voicing their disapproval that the majority of funds would be allocated towards large corporations rather than workers or families. The urgency for a government aid is rising rapidly, as the global death toll surpassed 16,000 with more than 367,000 confirmed cases. The Fed continues to try and do its part, yesterday announcing that it will begin a potentially unlimited QE program to purchase US Treasurys and MBS in addition to $300 billion in new financing for struggling businesses. US Treasury yields fell as the uncertainty around a stimulus package took precedent over the Fed's efforts. The 10-year Treasury is currently at 0.818%.

 

 

The US floated the idea of a joint alliance with Saudi Arabia to offset the oil price war. US Energy Secretary Dan Brouillette mentioned the potential alliance in an interview yesterday, stating "at some point we will engage in a diplomatic effort down the road. But no decisions have made on anything of that nature." Brent crude rose 3% after the announcement, a small increase compared to 48% decline thus far in March – a result of the rising Saudi Arabia-Russia tensions and virus-driven plummeting of global demand.

 

 

Day ahead. IHS Markit will release its PMI figures this morning -- economists expect it to sink to 42.5 from last month's 50.7. US new-home sales will be released shortly after with economists predicting a decrease of 7,000 to 757,000. The Richmond Fed's manufacturing survey is expected to fall to -12.5 from last months -2. The Senate will resume negotiations on a stimulus package.

 

 

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