Sector Update

November 30, 2020

After three straight weeks with vaccine news greeting our Monday mornings, it’s a bit quieter the last day of November. Looking back over the past month, all three major U.S. stock indices are up 10% to 11% — although it looks like a portion of those gains are at risk this morning. Meanwhile, 5- and 10-year maturity Treasurys are within 4 bps of where their yields started this month. That doesn’t mean there wasn’t any volatility between start and finish. Measured by daily closes, 5- and 10-year Treasurys traded in a 13 bps and 20 bps range, respectively, both occurring over just a 4-day trading period from November 5th to November 10th.

Sometimes Procrastination Pays Off?

Perhaps some welcome news this morning from banking regulators titled Statement on LIBOR Transition will brighten the day of some. 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. To be fair, there have been unexpected issues on most peoples plates this year that are more important, but this provides some breathing room for those still working toward a 12/31/21 deadline and a little more time for those who haven’t already started.

This Morning

Major U.S. stock indices are down 0.6% to 1.3% after a holiday-shortened week of strong gains. Treasury yields are 1 bp higher on maturities 7 years and longer and the curve is 1 bp steeper from Friday’s close.

Food for Thought – 2020 MBS Production by Coupon, Low Coupons Continue to Grow

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 (November) | Monthly, 10th business day

WSJ: U.S. Regulators Press Banks to Transition From Libor for New Transactions

“U.S. regulators on Monday pressed banks to transition away from using the London interbank offered rate on new transactions by the end of 2021 while announcing that some transactions based on the troubled benchmark would be allowed to mature before Libor fully winds down in June 2023.”

Federal Reserve: Statement on LIBOR Transition

“The administrator of LIBOR has announced it will consult on its intention to cease the publication of the one week and two month USD LIBOR settings immediately following the LIBOR publication on December 31, 2021, and the remaining USD LIBOR settings immediately following the LIBOR publication on June 30, 2023. Extending the publication of certain USD LIBOR tenors until June 30, 2023 would allow most legacy USD LIBOR contracts to mature before LIBOR experiences disruptions. Failure to prepare for disruptions to USD LIBOR, including operating with insufficiently robust fallback language, could undermine financial stability and banks’ safety and soundness.”

Vining Sparks: Coronavirus Chartbooks

PDF/Mobile: Coronavirus Chartbook (PDF)

Regulatory Links

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)

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 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

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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