Sector Update

November 16, 2020

Sometimes it can feel like days and weeks are running together and a Monday like today is reason why. For the second Monday in a row, news of a highly effective vaccine in third-phase trials has been announced. Today, it is Moderna’s turn as they announced a potential vaccine with a 94.5% efficacy rate. Market reactions are more muted this morning compared to last week though. Part of this is likely due to the widespread growth in infections, with few signs of slowing – especially considering the Thanksgiving holiday next week. The reality is it will take time for vaccine production to ramp up if FDA approval is granted. So, while the future is brighter, in all likelihood it still takes time and a bumpy path along the way. Market volatility surrounding these types of events, along with not knowing who will control the Senate, and of course unknowns could make for a volatile year-end.

Treasury yields began last week sharply higher with the 10-year Treasury nearly hitting 1.0% for the first time since March. Spreads largely tightened last week, especially in Munis and Corporates, as vaccine progress to date is promising. As discussed above, as the week progressed and higher daily virus cases mounted, yields faded from their highs. Still, yields ended  the week 3-8 bps higher and the curve steeper by 5 bps as measured by the 2s-10s.

This Morning

Last week, stocks, gauged by S&P 500 Index, stretched gains into a second week while the tech-heavy NASDAQ struggled. This morning, all three major U.S. indices are up 0.6% to 1.4%.  Treasury yields are marginally higher on longer maturities and curve steepness remains the same from Friday’s close.

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 (November) | Monthly, 5th business day

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

WSJ: S&P 500 Finishes Week at Record on Vaccine Optimism

“Still, many investors remain cautious about the coming winter because of elevated coronavirus infection levels. The U.S. on Thursday for the first time reported more than 150,000 new coronavirus cases in a single day, driven by record infection counts in more than a dozen states.”

WSJ: Moderna’s Covid-19 Vaccine Is 94.5% Effective in Early Results, Firm Says

“If regulators do authorize the vaccine, the initial supply of doses will be limited—20 million, or enough for 10 million people, by the end of the year, Moderna forecasts. The federal government may decide to vaccinate health-care workers and first responders first, followed by other segments of the population in phases until more doses are made next year.”

Vining Sparks: Coronavirus Chartbooks

PDF/Mobile: Coronavirus Chartbook (PDF)

Regulatory Links

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

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

Federal Reserve: 11/5 Federal Reserve issues FOMC statement

Federal Reserve: 10/30 Federal Reserve Board adjusts terms of Main Street Lending Program

Fannie Mae: 10/30 Fannie Mae Issues Inaugural Multifamily and Single-Family SOFR ARM MBS

FDIC: 10/29 Agencies Propose Regulation on the Role of Supervisory Guidance

FHFA: 10/20 Temporary Policy Allowing Purchase of Qualified Loans in Forbearance Extended

FDIC: 10/20 Temporary Relief from Part 363 Audit and Reporting Requirements (FIL-99-20)

FDIC: 10/20 Net Stable Funding Ratio (FIL-98-20)

LIBOR Transition Links

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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