Sector Update

December 14, 2020

In a reversal of the prior week, Treasury yields turned lower and the curve moved flatter for the week ended 12/11. Yields moved lower through last week as the hope for fresh stimulus dimmed and COVID-19 cases continued to mount – which many attribute to Thanksgiving gatherings. This brings anxiety to markets and individuals alike with Christmas and New Year holidays on the near horizon.

It is good news then that the first U.S. COVID-19 vaccinations began this morning with health workers first among those set to receive the Pfizer/BioNTech vaccine. Pfizer expects 25 million doses available this month and if Moderna’s vaccine is approved that number could grow. If we assume it takes a 75% vaccination rate to control COVID-19, (a figure given by Dr. Moncef Slaoui, the scientific head of Operation Warp Speed) it will take approximately 247.5 million Americans being vaccinated.  Right now, it is expected that 100 million Americans will be vaccinated by March.

Sometimes Procrastination Pays Off?

In case you missed it, a couple weeks ago banking regulators released a Statement on LIBOR Transition. In short, the administrator of LIBOR has announced it will continue to publish most US LIBOR rates (settings) through June 30, 2023. Yes, you read that right, an additional 18-months from the originally planned cessation date of December 31, 2021. The ARRC also recently published a Guide on the Endgame for USD LIBOR (a nice 5-page summary, in my opinion).

This Morning

Major U.S. stock indices are up with the NASDAQ up 1.1% and the S&P and Dow up 0.4% and 0.2% respectively. Treasury yields are relatively unchanged from Friday’s close and the 2s-10s remains at Friday’s closing level of 78 bps.

Sector Commentary

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 (December) | Monthly, 5th business day

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

WSJ: ‘The Best Year Ever’: 2020 Was Surprisingly Good to Small Banks

“PPP’s delivery of cash to banks’ small-business customers helped limit losses. What’s more, dire predictions that the pandemic would devastate a wide swath of businesses didn’t materialize. At many banks, problem loans have remained concentrated in a handful of hard-hit industries: hospitality and tourism; bricks-and-mortar retail; and energy.”

Freddie Mac:

FHFA: 12/10 Mortgage Forbearance Rates during the COVID-19 Crisis

“This Insight contrasts the characteristics of those mortgages in forbearance across the current COVID-19 crisis and two earlier periods: the 2017 Storms period (in declared disaster areas in the aftermath of hurricanes and tropical storms in 2017, including Hurricanes Harvey, Irma, and Maria); and the Baseline period (January 2019 to February 2020) just before the current crisis.”

Vining Sparks: Coronavirus Chartbooks

PDF/Mobile: Coronavirus Chartbook (PDF)

Regulatory Links

FHFA: 12/10 FHFA Further Extends COVID-Related Loan Flexibilities

FHFA: 12/1 FHFA Extends Foreclosure and REO Eviction Moratoriums

Federal Reserve: 11/30 Statement on LIBOR Transition

Treasury: 11/30 Treasury and FRB Announce Extension of Four Lending Facilities Until 3/31/2021

Federal Reserve: 11/25 Minutes of the Federal Open Market Committee, November 4-5, 2020

FDIC: 11/20 Agencies Provide Temporary Relief to Community Banking Organizations

FHFA: 11/18 FHFA Announces Final Capital Rule for the Enterprises

FHFA: 11/13 FHFA Further Extends COVID-Related Loan Flexibilities

FDIC: 11/6 Interagency Statement LIBOR Transition for Loans (FIL-104-20)

LIBOR Transition Links

ARRC 12/4: ARRC Releases Guide and Highlights New ISDA Webinar on USD LIBOR Endgame Developments

ARRC 11/30: ARRC Applauds Major Milestone in Transition from U.S. Dollar LIBOR

ARRC 10/15: FAQs — Updated 10/15/2020

ARRC 9/30: August – September ARRC Newsletter

ARRC 8/27: Recommended Hardwired Fallback Language for Bilateral Business Loans

ARRC 8/18: Transition Resource Guide for ARM and Private Student Loans

ARRC 8/7: ARRC Releases the SOFR Starter Kit

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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