Rates Start the Day Lower as COVID Cases Increase Globally

 

Rates and risk assets fall to start the day as COVID-19 cases surge domestically and abroad. After months of lockdown, multiple US states like Arizona and Oklahoma continue to report a surge in virus cases. The CDC’s deputy director added, “If cases begin to go up again, particularly if they go up dramatically, it’s important to recognize that more mitigation efforts such as what were implemented back in March may be needed again.” Meanwhile, Beijing also saw 80 new COVID-19 cases- the most significant surge in cases in China since the original outbreak earlier this year. Treasury yields and swap rates are lower, the 10-year Treasury yield falling by 3 basis points to 0.67% while US equity futures point to a lower open.

 

 

Richmond Fed President Thomas Barkin sees slow economic recovery ahead. Despite the blockbuster May jobs report, Barkin believes the underlying data may be worse than the reported 13.3% unemployment rate. Barking added that the “unemployment reality” is in the “high teens” and that a disproportionate number of people of color experienced job loss. Because of this, Barkin believes the economy still needs added stimulus “beyond what the Fed can deliver.”

 

 

Tomorrow’s US industrial production data could show a rebound from March and April lows.  Production in the US slowed dramatically in April with the level falling 11.2%, the largest drop in the history of the index.  In addition to the oil market crash, manufacturing, consumer goods, and consumer durables plummeted 13.7%, 11.7%, and 36% respectively.   Economists forecast May’s figure to reflect resumed activity across the US as businesses begin to reopen.