Rates Fall as President Trump’s New Task Force Discusses Reopening US Economy

 

President Trump’s new COVID-19 task force discusses reopening economy. Titled the Great American Economic Revival Industry Groups, the team consists of 200 business executives from around the country (key members include Tim Cook, Mark Zuckerberg, and Jamie Dimon) tasked with discussing a a plan to reopen parts of the US and coordinating responses to economic damage already incurred. In the meantime, the Trump administration continues to face criticism in its plans to reopen the economy in the near future, as banking and financial executives cautioned yesterday that testing needs to dramatically increase before people will feel comfortable resuming their normal schedules. Despite their concerns, President Trump plans to announce guidelines today to ease nationwide lockdowns, stating the country will “open very very shortly, if not, almost immediately.” A cautious tone has been exhibited in financial markets so far this morning, with Treasury yields/swap rates 1-5bps lower across the curve in a bull steepening pattern, and equity indices extending yesterday’s losses.

 

 

Morgan Stanley is the latest big bank to miss earnings expectations. Their Q1 figures displayed earnings down 30% to $1.7B, with companywide revenue falling to $9.49B. Morgan Stanley attributed most of its losses to the pandemic, which hit the value of their loans, investments, and trading assets. The bank has set aside $388M for bad loans granted in the first quarter. Morgan Stanley joined other competitor banks in reporting a jump in trading revenue due to volatile economic conditions. In looking at the banking industry as a whole, this morning Minneapolis Fed President Neel Kashkari suggested that banks should stop paying dividends altogether and raise equity capital in order to protect themselves from a deeper economic downturn.

 

 

Day ahead. Weekly US jobless claims came in at 5.25M, easing modestly from the recent record highs. In the month leading up to April 11th, roughly 22 million people applied for jobless aid. US housing starts for March fell to 1.266M from 1.599M last month. Housing starts fell 22.3% with business permits down 6.8% — the largest decline since 1984. The Philadelphia Fed’s manufacturing survey, which measures business growth in Philadelphia, Delaware, and New Jersey, for April, fell to -56.6 — the lowest reading since 1980. President Trump will participate in the G7 call this morning to discuss a coordinated effort against the spread of COVID-19. A number of Fed officials will speak throughout the day to shed light on the coronavirus pandemic.