Sector Update

November 2, 2020

The Treasury curve was steeper again last week as yields increased. Shorter maturities were unchanged while longer maturities increased by 2-4 bps. The 2-10 spread closed last week 4 bps higher at 72 bps. Even though the 2-10 spread is slightly flatter this morning, the 2-10 spread looks to have pushed out of the range it has occupied for most of the Pandemic. As we have mentioned previously, the greater likelihood of additional stimulus measures and associated increases in borrowings and/or a stronger than expected recovery is likely pushing the curve steeper. As COVID-19 cases both here and abroad continue to push into record territory and new shutdowns are imposed overseas, part of the rationale for a steeper curve is weakened.

Stocks took another hit last week with all three major U.S. equity indices down over at least 5.5%.  Here’s an interesting statistic. According to a WSJ article, last week was only the 17th time since 1962 when the S&P 500 was down on the week and 10-year Treasury yields increased. This surprised me as being that abnormal of an occurrence; however, 2020 is anything but a normal year.

Bond Fundamentals Webinar Series

We’d like to thank everyone who attended last week’s 4-part 2020 Bond Fundamentals webinar series. Both the presentations and a recording of each session are now posted in the Webinar Archive of the online portal (login necessary). If you need to register for access, please click here.

This Morning

Stocks, gauged by S&P 500 Index, continued declines for the second week in a row. So far this morning, all three major U.S. indices are up 0.0% to 1.3%. Treasury yields have given back all last week’s gains and more in some cases and the curve is flatter this morning. The 2-10s is 4 bps lower from the Friday close, currently at 68 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 (October) | Monthly, 5th business day

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

WSJ: U.S. Bond Yields Climb on Post-Election Outlook

“The S&P 500 posted its worst week since March on Friday, even as the 10-year yield, which rises when bond prices fall, notched a second consecutive weekly gain. It was just the 17th time since 1962 that the 10-year yield increased for the week while the S&P 500 declined, according to Bespoke Investment Group.”

Vining Sparks: Year-End Balance Sheet Management

“As the end of 2020 approaches and preparations for next year begin, we have updated our annual Year-End Checklist to reflect these unique challenges to help with your planning process. Additionally, we have developed several balance sheet and portfolio management strategies for your consideration.”

Vining Sparks: Coronavirus Chartbooks

PDF/Mobile: Coronavirus Chartbook (PDF)

Regulatory Links

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)

FDIC: 10/14 3rd Quarter 2020 Call Reports (FIL-97-20)

SBA: 10/8 SBA and Treasury Announce Simpler PPP Forgiveness for Loans of $50,000 or Less

Fannie Mae: 9/30 Fannie Mae Extends Timeframe for Single-Family MBS Delinquent Loan Buyout Policy

Ginnie Mae: 9/24 Notification regarding Loans after Deferment Loss Mitigation

FHFA: 9/24 Extends Buying Loans in Forbearance & COVID-Related Loan Processing Flexibilities

Ginnie Mae: 9/21 Ginnie Mae Announces Pooling Restrictions for LIBOR-based Adjustable-rate Mortgages

FDIC: 9/18 Results of Summary of Deposits Annual Survey

Federal Reserve: 9/16 Federal Reserve issues FOMC statement

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

The information included herein has been obtained from sources deemed reliable, but it is not in any way guaranteed, and it, together with any opinions expressed, is subject to change at any time. Any and all details offered in this publication are preliminary and are therefore subject to change at any time. This has been prepared for general information purposes only and does not consider the specific investment objectives, financial situation and particular needs of any individual or institution. This information is, by its very nature, incomplete and specifically lacks information critical to making final investment decisions. Investors should seek financial advice as to the appropriateness of investing in any securities or investment strategies mentioned or recommended. The accuracy of the financial projections is dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the projection period may vary from the projections. The firm may have positions, long or short, in any or all securities mentioned. Member FINRA/SIPC.
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