Rates Mixed as President Trump Announces Guidelines to Reopen US Economy

 

President Trump announces guidelines for reopening the US economy. In the daily COVID-19 briefing yesterday, President Trump detailed a three-phase plan to gradually reopen the nation. The first phase includes opening a number of venues like movie theaters and restaurants, followed a second phase where nonessential travel can resume, and the third placing no restriction on workplaces. Governors will ultimately decide on the timeline for their respective states, but President Trump urged them to act quickly, saying: “We must have a working economy, and we want to get it back very, very quickly.” US Treasury yields ended mixed across the curve yesterday, but the S&P 500 has opened 2% higher.

 

 

Crude hit an 18-year low this morning. Despite the OPEC+ decision to cut production, the flood of Saudi and Russian oil in the market has driven crude prices to new lows. The US oil market remains unstable, unable to be offset by the 9.7M barrels/day G20 nations pledges to withhold. WTI futures fell 5.6% to $18.77/barrel with the imminent expiry of the May contract and is poised to lose 20% of its value for a second week in a row. With US strategic reserves and a number of tankers already full, US shale producers are running out of space to store their oversupply. Despite these stark figures, Saudi Energy Minister Abdulaziz bin Salman Al Saud is still confident that the energy industry will scale back to its original highs, as it is a large component of GDP growth for a number of countries. He encourages other countries to continue cutting supply, adding, “None of us will gain if we don’t fulfill our commitment. We would not have signed up to do it if we had a tinge of concern that people would not.”

 

 

China reports their first economic contraction on record. This morning, China reported a 6.8% decline in YoY GDP caused mainly by the coronavirus spread throughout the nation. Their manufacturing sector was hit hard, dropping 1.1% in March as disrupted supply chains caused a supply shock. Chinese domestic retail sales plummeted 16% with joblessness soaring to 5.9% in March.

 

 

Day ahead. The Conference Board’s leading economic index for March, which measures peaks and troughs in the business cycle, is forecasted to fall 7.2% from last month’s figures. The Baker Hughes rig count, an early indicator of future output, is released this afternoon. The price war between Russia and Saudi Arabia is forecasted to have pushed the number of active rigs to drop below 600 for the first time since 2016, with economists expecting drillers to continue cutting rigs in the coming weeks. A number of community banks will report earnings today and early next week.