Sector Update

August 3, 2020

Treasury yields continued to grind lower last week and maturities in the 2-10 year range all closed at record lows on Friday. Last week, in regard to more significant declines in yields on longer maturities, we talked about “lower for longer” (maybe we should change it to lower for forever) and low inflation expectations. Over the weekend, a WSJ article discussed the Fed wrapping up a review started last year of their policy making. With short-term rates virtually at 0% and unlimited asset purchases occurring, the gist is the Fed would not want to be caught in a predicament where they have basically no room to advance their policies. The article suggest the Fed would take a “more relaxed view by allowing for periods in which inflation would run slightly above the bank’s 2% target, to make up for past episodes in which inflation ran below the target.” Perhaps the market is taking note as longer maturities have increased in yield this morning more than their shorter counterparts.

So far this morning, U.S. stock indices are up 1.0 to 1.5 percent. The Treasury curve’s slope is 2 bps wider from Friday’s close of 42 bps. From a yield perspective, Treasury bills are unchanged to 1 bp lower, 2- to 10-year maturities are unchanged to 3 bps higher, and long bonds are up 4-5 bps. Of interest this week to many readers, MBS prepayment information will be released, and we will have commentary available this Friday. Here is last month’s if you aren’t familiar with it.

Spread Commentary – Largely Tighter

(Click links below for more details)




What We’re Reading

Market Today | Daily

Weekly Recap | Weekly, Friday

Brokered Deposit Rate Indications | Weekly, Monday

Investment Alternatives Matrix | Weekly, Tuesday

MBS Prepay Commentary (July) | Monthly, 5th business day

SBA Prepay Commentary (July) | Monthly, 10th business day


Freddie Mac: Mortgage Rates Decrease Slightly

“Rates continue to remain near historic lows, driving purchase demand over 20 percent above a year ago.”


WSJ: When Their PPP Loans Didn’t Come Through, These Businesses Broke Up With Their Banks

“Many business owners who felt unserved by their banks voiced their displeasure by moving their money elsewhere. Of businesses that secured PPP funding, about 28% received their loan from a lender with whom they had no prior relationship or a bank that wasn’t their primary one, according to a July survey of 931 firms conducted by Barlow Research Associates. About 44% of those borrowers said they would move at least some of their accounts and loans to the bank that came through for them during PPP, the survey found.”

Vining Sparks: Coronavirus Chartbooks

PDF/Mobile: Coronavirus Chartbook (PDF)

Regulatory Links

FHFA: 7/31 Temporary Policy Allowing Purchase of Qualified Loans in Forbearance Extended

FDIC: 7/30 Proposed Revisions to the Call Report and the FFIEC 101 Report (FIL-73-2020)

Federal Reserve: 7/29 Federal Reserve issues FOMC statement

Federal Reserve: 7/28 FRB extends through 12/31 lending facilities scheduled to expire on or around 9/30

Federal Reserve: 7/17 FRB modifies MSLP to provide greater access to credit for nonprofit organizations

FDIC: 7/10 Consolidated Reports of Condition and Income for 2Q 2020 (FIL-69-2020)

FHFA: 7/9 FHFA Extends COVID-Related Loan Processing Flexibilities for FN/FH Through August

FDIC: 7/1 FFIEC Joint Statement on Managing the LIBOR Transition (FIL-68-2020)

Federal Reserve: 7/1 Minutes of the Federal Open Market Committee, June 9-10, 2020

FHFA: 6/29 FHFA Provides Tenant Protections

Federal Reserve: 6/25 Results of stress tests for 2020 and additional sensitivity analyses in light of coronavirus

Federal Reserve: 6/25 Agencies finalize amendments to swap margin rule

LIBOR Transition Links

ARRC 7/8: ARRC Releases a Tool to Help Firms Move Internal Systems and Processes away from LIBOR

ARRC 6/30: Further Details Regarding Its Recommendation of Spread Adjustments for Cash Products

ARRC 6/30: Recommended Fallback Language for Private Student Loans

ARRC 6/30: Updated Recommended Hardwired Fallback Language for Syndicated Loans

ARRC 6/5: ARRC Welcomes CFPB’s Updated Consumer Handbook and Proposed Rule Facilitating Transition Away from LIBOR

ARRC 5/28: ARRC Welcomes FNMA and FHLMC’s LIBOR Transition Playbook

ARRC 5/27: ARRC Announces Best Practices for Completing Transition From LIBOR

ARRC 4/17: ARRC Announces Its Key Objectives for 2020

ARRC: 4/8:  ARRC Announces Recommendation of a Spread Adjustment Methodology for Cash Products

ARRC: Link to all ARRC Announcements

ARRC: Link to all ARRC Publications

ARRC: Link to ARRC Fallback Contract Language

Fannie Mae: LIBOR Transition Webpage

Freddie Mac: LIBOR Transition Webpage

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