Rates Fall as Second Wave Hits Europe, Stimulus Remains in Flux

Bank earnings continue

Large banks continue to report third quarter results today- Bank of America, Goldman Sachs and Wells Fargo all reporting better than expected credit provisions, with the usual noise coming from their trading businesses. JPMorgan noted yesterday that they don’t expect credit to normalize until the end of 2021 and commented that a lot of the benign credit metrics are the result of prior fiscal stimulus.

Turning to fiscal stimulus (or lack thereof), the Senate announced that it will vote on a “skinny” relief bill later this week that will fund an additional $670B of PPP loans. House Speaker Nancy Pelosi has already labeled the proposal a nonstarter, with Democrats demanding a larger and broader stimulus package. Treasury yields and swap rates are modestly lower once again after falling ~4 basis points on the day yesterday.

COVID-19 cases surge in Europe

Across the pond, Europe continues to grapple with a resurgence of coronavirus- the UK in particular seeing COVID-19 cases quadruple in recent weeks and climb above the threshold where the government implemented a national lockdown in early March.

Amid that backdrop, safety concerns led two large pharmaceutical companies to halt trials of their experimental COVID-19 drugs. Eli Lilly and Johnson and Johnson both paused trials after adverse reactions from participants. Neither company was seen as a “front runner” in the race to develop a vaccine but share similarities with the treatments being developed by AstraZeneca and Regeneron.