Rates Fall After President Trump’s Stimulus Package Fails to Quell Virus Fears

 

Treasuries and haven assets are rallying after President Trump’s coronavirus remarks yesterday. Starting Friday, President Trump has issued a 30-day European travel ban coupled with an underwhelming stimulus package that failed to calm the markets. Trump’s aid package is awaiting approval from Congress and includes paid sick leave for who are ill or quarantined. The Small Business Association has also pledged to offer low-interest rate loans to cushion the virus impact. Yesterday morning, the WHO also declared the outbreak a global pandemic as it now spans 112 countries – this term only used to describe few other diseases like the H1N1 flu in 2009 and HIV/AIDS. WHO Director General Tedros Adhanom Ghebreyesus said, “All countries can still change the course of this pandemic. Those with a handful of cases can prevent those cases becoming clusters and those clusters becoming community transmission.” S&P 500 futures extended their losses down 20% from the recent high and entered a bear market after the longest bull-run in history. Treasury yields and swap rates are 10-20 basis points lower across the curve — the current 10-year Treasury yield sitting at 0.68%.

 

 

Britain’s government and central bank are joining forces. After the BOE followed the Fed in cutting rates 0.5% yesterday, they announced that the UK Treasury will help coordinate a package of initiatives to support British business and households impacted by the virus spread. Treasury chief Rishi Sunak detailed that the measures would include tax holidays, government refunds, and a hardship fund for those impacted the most. Unlike the BOE, the ECB has chosen to hold rates steady. The bank instead choosing to boost easing measures by 120 billion euros till year-end and offering favorable terms for longer-term loans. The bank admitted that the virus has come as a major shock – Christine Lagarde calling for a “ambitious and coordinated policy response” in her press conference this morning. European stocks have plunged in response and the euro remains low after the announcement.

 

 

Day ahead. US jobless claims released this morning came in lower that economist expectations at 211,000. The US PPI fell 0.6% from the previous month. The Fed will release their weekly balance sheet this afternoon.