Daily Market Color June 25, 2020Risk Assets Fall as Virus Cases Continue to Rapidly Rise Rates and risk assets fall as COVID-19 spread weighs on recovery hopes. Multiple states reported record daily increases in COVID-19 infections- spooking equity markets- the S&P 500 and DJIA declining 2.6% and 2.7% on the day respectively. Speculation around an increase in lockdown measures (and conversely a fall in economic activity) led bonds higher as well- yields falling across a flattening curve. The 10-year Treasury yield would ultimately close 3 bps lower to 0.68% while the spread between 2-year and 10-year yields fell to 49.1 basis points. This morning, rates and risk assets are lower once again- swap rates 2-3 basis points lower across the curve. COVID-19 cases continue to rise. Echoing Texas Governor Greg Abbott’s comments, California Governor Gavin Newsom hinted at increased measures to combat the spread of the virus in the state, adding, “we cannot continue to do what we have done over the past weeks.” The state reported another record jump in cases at 7,149 new infections, a 2,000 case jump from the day before. Meanwhile, governors from the Tri-State area issued a mandatory two-week quarantine for people traveling from high risk areas. The current virus tally has risen above 2.3 million in the US with fatalities nearing 122,000. Despite over half of the states reporting spikes in infections, businesses currently continue to reopen as scheduled. Oil prices fall over 5% as virus concerns continue to mount. With virus cases rising globally, markets are beginning to question whether a quick economic rebound is possible. Like at the beginning of the pandemic in March, crude inventories are on the rise. Adding to the mix, investors fear that demand could soon plummet if lockdown measures are reinstated. According to the EIA, US crude inventories have risen for three consecutive weeks while domestic oil production has ramped up from 500,000 to 11 million barrels per day. With inventory buildup raising storage concerns once again, WTI crude for August delivery recorded a 5.9% drop to close at $38.01/barrel on the day.