Daily Market Color November 20, 2020Rates Fall After Jobless Claims Rise for First Time Since October Rates fall as jobless claims miss forecasts Rising for the first time since early October, initial jobless claims came in higher than forecast. The figure rose by 742,000 from 711,000 the week before, hinting the pace of the recovery is slowing. Despite the weak economic data and rising infection rates, tech stocks pulled major indices higher on Thursday — the S&P 500 and DJIA closed 0.4% and 0.2% respectively. Treasury yields and swap rates fell across the curve — the benchmark 10-year closed 3 bps lower. UST yields are trading mixed this morning. Fed lending programs set to expire on December 31st In the early stages of the pandemic, the Fed created a host of emergency lending programs to help keep businesses afloat after COVID-19 restrictions forced widespread closures. Some Fed officials hoped to extend some of the deadlines after the recent uptick in virus cases pushed some state officials to reintroduce virus restrictions. Treasury Secretary Steven Mnuchin has chosen to let the programs expire at the end of December and repurpose the leftover funds. So far, the Fed has loaned roughly $25 billion through the emergency programs and will return around $430 billion in unused funds to the General Fund. Mnuchin hopes Congress will be able to use that money to fund its next stimulus package. The Fed issued a statement disagreeing with Mnuchin’s choice, adding, “The Federal Reserve would prefer that the full suite of emergency facilities established during the coronavirus pandemic continue to serve their important role as a backstop for our still-strained and vulnerable economy.” Existing home sales rose to 6.85 million in October The figure beat economist forecasts, rising from September’s stronger-than-expected 6.54 million. Sales of existing homes are up 26.6% this year, leaving only 1.42 million existing homes on the market. Economists believe the rising demand is fueled by the current low rate environment. If home buying continues at this pace, the market has around a 2.5-month supply, the lowest it has ever been. FX Friday Dollar investors have been focused on rising coronavirus case reports worldwide. As of Friday, spooked investors are saddling up dollar positions on speculation the Federal Reserve may plan to once again loosen monetary policy come their final meeting of 2020 in mid-December. Although there was an increase in reported first-time job claims, breaking a 5-week downward trend, the dollar reaction was fairly muted. Over in the UK, the pound dipped during Thursday’s trading sessions, hitting a low of 1.3202, after Eurozone leaders asked the European Commission to consider publishing no-deal Brexit plans as the end of 2020 nears. Coupling the stalled negotiations with a second lockdown, the UK economy is now bracing for a double-dip recession based on many economist polls. As of Friday morning’s Asia trading session, the pound has come up from Thursday’s lows and hit 1.3268 at the time of this publication.
