Risk Assets Rise as Economy Begins to Reopen

 

Risk assets post late day rally. After trading lower for the majority of yesterday’s session, equities staged a comeback in the last hour of trading as investors looked past heightened US-China trade tensions and US factory orders declining 10.3% to the lowest level since 1957. The S&P 500 and Dow Jones would ultimately close 0.4% and 0.1% higher, respectively, while Treasury yields/swap rates rose modestly – the 10-year UST yield rising 2 basis points higher to 0.63%. This morning, rates and risk assets are higher once more with cautious optimism around the reopening of businesses in numerous states.

 

 

Treasury Department to issue $2.9T in debt over next few months. In a statement released by the Treasury, the “increase in privately-held net marketable borrowing is primarily driven by the impact of the COVID-19 outbreak, including expenditures from new legislation to assist individuals and businesses, changes to tax receipts including the deferral of individual and business taxes.” The Treasury has funded and backed many Congressional and Fed led programs, bringing the current total to over $2T in allocations. At the end of the first quarter, the national debt ballooned to $24.9T, growing $1.5T since March 1st. With more stimulus programs from Congress and the Fed on the docket, the figure is expected to increase further in the near future.

 

 

Day ahead. The international trade balance was published this morning, with the level widening to $44.4B. Exports and imports fell dramatically for March as supply chains were affected due to the virus. April’s figures increased $4.6B from March as the full impact of the virus is reflected. ISM’s nonmanufacturing index fell to 41.8 from March’s 52.5. A reading below 50 indicates that the nonmanufacturing industry is generally contracting. Economists believe March’s higher figure reflected backlogged orders, with April’s level reflecting the full effect of the coronavirus. Chicago Fed President Charles Evans, St. Louis Fed President James Bullard, and Atlanta Fed President Raphael Bostic will all speak about economic conditions throughout the day.