Treasury Yields Rise as Rate of New COVID Cases Slows

 

Rates and risk assets rebound as new COVID infections plateau and Congress discusses additional stimulus. Though Congress will not be back in session until April 20th, House Speaker Nancy Pelosi held a call on Monday with more than 180 House Democrats to discuss an additional relief package worth at least $1T. Former Fed Chair Janet Yellen fueled the urgency to pass another stimulus bill, telling Congress that she expects unemployment applications to soar even higher in the coming weeks. House Democrats aim to pass the bill later this month. News of additional stimulus, coupled with slowing COVID-19 infections in the United States helped risk assets and Treasury yields climb higher yesterday. The S&P 500 would end the day 7.03% while the 10-year Treasury yield climbed 7 basis points to close at 0.67%.

 

 

Fed announces new funding facility designed to increase bank’s appetite for PPP lending. Thus far, the PPP has lent $36B to small business, across 124,000 loans. In its current form, the program requires banks to hold loans on their books for at least 7 weeks before selling them. The new funding facility announced by the Federal Reserve is designed to alleviate liquidity pressure on banks that participate in the PPP. The funding facility will purchase loans directly from banks as soon as they are made- diminishing capital and liquidity requirements for banks and theoretically making lending under the PPP program more attractive.

 

 

Day ahead. February numbers for the US job openings and labor turnover survey will be released this morning. US consumer credit figures for February will be released this afternoon. The Fed will also offer another $1.5T in liquidity across three different repo operations today.