Daily Market Color

Rates Rise as Officials Begin to Discuss Reopening of Economy


State officials are developing plans to reopen the US economy as COVID-19 infection rates continue to slow. Though the national toll has passed 23,000 fatalities, both local and federal conversations have firmly shifted to re-opening the US economy. Two groups of governors across both coasts are forming regional working groups to discuss a coordinated plan to reopen the US. This came after CDC Director Robert Redfield said, “You’ll know when you’re at the peak when the next day is actually less than the day before, but clearly the rate – we are stabilizing across the country right now in terms of the state of this outbreak.”


New COVID-19 cases in Europe have also continued to decelerate. The decline in new cases in hard hit countries like Spain and Italy has policy makers openly suggesting that reopening economies may be on the horizon despite many extending current lockdown measures. This global optimism helped rates climb across the curve, the 10-year Treasury yield climbing 5 basis points to 0.77%.



JPMorgan and Wells Fargo report dramatic drop in Q1 earnings. The first large bank to report earnings, JPMorgan posted a surprise 69% decline in Q1 profits, while setting aside an additional $6.8B for bad loans. The dramatic ramp up in loan loss provisions comes as the bank prepares for a “fairly severe recession.” Wells Fargo reported shortly after, revealing an 89% drop in net income despite average loans up 2% to $965 billion — largely due to Wells Fargo’s participation in the Paycheck Protection Program. These are not expected to be the last financial institutions to miss earnings expectations amid the pandemic, with most community and regional banks reporting results later this week and next.



Day ahead. This morning, the IMF published their World Economic Outlook, which provided stark figures for the global economy. The IMF predicts the global economy will contract by 3% this year, with a partial recovery projected for next year contingent on an improvement in the health crisis. US import and export prices for March fell 2.3% and 1.5% respectively from February’s figures, heavily impacted by the oil price war between Russia and Saudi Arabia. Excluding energy numbers, import prices were flat. G7 finance chiefs are scheduled to hold a video conference to discuss global coordination amid the pandemic.


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