Rates and Risk Assets Fall as Oil Continues Decline

 

Rates fall near all-time lows as oil prices continue to plummet. With the May WTI contract expiring, the oil market’s attention turned to the June contract which fell over 40% on the day yesterday to $11.57/barrel. Risk assets followed crude lower, the S&P 500 falling 3.07% (its biggest fall in over three weeks) and the VIX or “Fear Index” climbing to 45.41 after declining into the 30’s for part of last week. Rates in turn fell near all-time lows, the 10-year Treasury yield closing at 0.57% while swap rates fell 3-5 basis points across the curve. Rates and US equity futures bounced higher at the open this morning after several days of declines.

 

 

Senate passes additional $480B stimulus bill. The new stimulus bill will fund the already depleted Paycheck Protection Program and provide additional funding for COVID-19 testing and hospitals. The original PPP processed over 1.6M loan applications for funds totaling $349B. Texas and California hold the highest number of authorized loans with $21.7B across 88,434 loans and $20.8B across 54,922 loans respectively. Roughly 70% of approved loans are under $150,000, with only 9.9% ranging from $350,000 to $1M. The majority of funds were allocated to construction firms, with scientific companies and manufacturers close behind. If the extra funding passes through the House, President Trump has indicated that he will sign it into law immediately.

 

 

Day ahead. The Federal Housing Finance Agency house prices index released this morning showed a 0.7% MoM rise for February, beating economist expectations. The index covers transactions involving conventional mortgages. The Energy information Administration will provide information on petroleum inventories later this morning for oil produced both here or abroad. Due to oil’s steep demand shock and overproduction, economists expect crude oil inventories to skyrocket with all domestic reserves full. Bank earnings will continue to roll in as well with 9 different community and regional banks set to report first quarter results.