Daily Market Color July 20, 2021Rates Mixed as Delta Variant Remains In Focus Long end of the yield curve rebounds after yesterday’s declines Today, markets remained focused on the fast-spreading delta variant and its effect on the pace of the US economic recovery. Treasury yields and swap rates ended the day mixed, short-term rates falling 1-3 bps while the 10-year UST yield closed 3 bps higher at 1.22%. Major equity indices closed in the green – the S&P 500, DJIA, and Nasdaq climbing 1.52%, 1.62%, and 1.57%, respectively. June housing starts and permits miss expectations Last month, US homebuilding increased 6.3% to an annual rate of 1.643 million (a three-month high), while permits for future construction declined 5.1% to 1.598 million (an eight-month low). According to the report, housing demand remains supported by low mortgage rates, but labor shortages and rising input costs have limited activity. As a result, backlogs of single-family homes that have not yet been built hit the highest level since 2006. President Biden addressed the supply chain disruptions in his speech yesterday, commenting his “administration is doing everything we can to address it. But, again, these disruptions are temporary.” Delta variant responsible for 83% of current US COVID-19 cases The seven-day average of COVID cases is now 32,287, over double the average from ten days ago, while hospitalizations are up 35.8%. The delta variant is thought to be 40-80% more infectious and accounts for the majority of infections in the US. CDC director Rochelle Walensky commented, “This is a dramatic increase. In some parts of the country, the percentage is even higher, particularly in areas of low vaccination rates.” Nearly half of the US population has been fully vaccinated, though multiple states have vaccination rates below 40%.