Sector Update

January 19, 2021

Last week was a relatively calm week; however, markets did have to weigh weaker economic data along with reported plans of the Biden administration’s stimulus bill coming in at $2-trillion dollars. Yields briefly hit levels not seen since March of 2020 on Tuesday the 12th. Below, I’ve borrowed a graph from our economic team’s Weekly Market Recap to illustrate the ranges we saw on selected maturity Treasurys.

This week’s economic calendar isn’t very busy, but corporate earnings will be heavily featured in headlines this week. Also, Joe Biden will be inaugurated tomorrow (1/20) as the 46th President of the United States under what will hopefully be peaceful circumstances.

This Morning

After closing at record levels, (S&P 500, NASDAQ, and Dow Jones) on January 8th, major U.S. stock indices slipped last week by 0.9 to 1.5% while the NASDAQ Bank Index was up 2.6%. This morning, major indices are up 0.5 to 1.3%. Treasury yields are fighting to regain what they gave up last week. For the second week in a row, it will be interesting to watch if yields can maintain these current levels.

Treasury Yields Jump Higher to Start 2021 – Give back a fraction last week

Yield Curve Steeper

Food for Thought – NFIB Small Business Economic Trends

As part of our SBA Prepay commentary released Friday (1/15), we included a look at data compiled by the National Federation of Independent Business. As part of a monthly survey, they ask “What is the single most important problem facing your business today?”. There are many things to glean but here are a couple that stick out to me in regards to confidence and inflation.

Sector Commentary (click on links for more in-depth look)

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 (January) | Monthly, 5th business day

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

Vining Sparks: MBS & Prepayment Update: Volatile 2020 Comes to an End

Last year was one for the records in the mortgage market. This presentation looks back over 2020 at what happened and how different prepay models performed over the year. Some did better than others. It is always important, but especially in this environment, that robust prepayment assumptions are used. We also make note that Bloomberg is releasing a model update and provide some background and comparisons.

Vining Sparks Interest Rate Products: LIBOR’s Denouement

“It is clear from recent events that we have begun the final countdown to the end of LIBOR. The regulatory bodies have told us they are serious about the end of LIBOR and banks need to be moving forward with plans to adjust to the new reality.”

Vining Sparks: Coronavirus Chartbooks

PDF/Mobile: Coronavirus Chartbook

LIBOR Transition Links

ARRC 12/18: FAQs — Updated 12/18/2020

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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