Daily Market Color

Rates Trade Lower as Markets Await Election Results

Winner of 2020 presidential election remains in doubt, blue wave fails to materialize
Vice President Joe Biden and President Donald Trump remain locked in a close race – one that could be too close to call for several days. The race will likely hinge on the results in three familiar swing states – Wisconsin, Michigan and Pennsylvania. Going into election day, markets had largely priced in a “blue wave” that would have given Democrats the presidency and a Congressional majority- an outcome that would have paved the wave for substantial fiscal stimulus. While the presidency remains in doubt, it seems clear that Republicans will maintain control of the Senate- an outcome that has Treasury yields and swap rates sharply lower across the curve today. The 10-year Treasury yield is trading ~12 basis points lower at 0.78% while the S&P 500 has climbed 1.97% to start the day.
Private payrolls rose by 365,000 in October
According to this morning’s ADP employment report, private payrolls grew dramatically less than expected, falling below last month’s 749,000.  Economists believe the root cause of the rise lies with the service-providing sector, with leisure and hospitality recording a 125,000 jump.  The report hints at what to expect from Friday’s October jobs report — the general consensus is that the unemployment rate will fall from 7.9% to 7.7%.
FOMC begins its two day meeting
Despite a tumultuous week elsewhere, the Fed will conduct its normal FOMC meeting over the next two days.  While the market is pricing in no changes whatsoever to the Fed’s policy rate, Fed Chair Jerome Powell is expected to provide additional details around the Fed’s asset purchase program. Powell will also likely re-emphasize the limitations of monetary policy and argue for additional fiscal stimulus- particularly in light of re-accelerating COVID-19 infections around the country. The FOMC’s regular press conference will occur tomorrow at 2:00pm ET.

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