Sector Update

September 21, 2020

Treasury yields steepened last week but that has since been erased this morning. The 2-10 spread closed last week 2 bps higher at 56 bps (currently at 53 bps). The 2-10 spread still shows reluctance to remain above/below 50 bps for a meaningful amount of time lately and looks to potentially test that level this week. Speaking of a relatively flat yield curve, in this week’s VSIRP Commentary they discuss while we have seen short-term rates this low before, we haven’t seen this level of short-term rates coupled with very low spreads.

This Morning

Stocks, gauged by S&P 500 Index, fell 0.6% (after falling 2.5 last week and 2.3% the week prior) marking the first time the index has fallen for three straight weeks in recent history. So far this morning, equities are continuing the recent trend and major US indicies are down 1.5% to 3.0%. Treasury yields have largely given back last week’s increase in yields and the 2-10s is pressing back towards 50 bps.

Sector Commentary

Regulatory Links

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

Federal Reserve: 8/27 Announces approval of updates to its Statement on Longer-Run Goals and Monetary Policy Strategy

Fannie Mae: 8/27 Updated Eight Lender Letters

Fannie Mae: 8/27 Suspension of Foreclosures and Evictions on Single-Family Mortgages Through Year-End

FDIC: 8/26 Agencies Issue Three Final Rules (CBLR, CECL, and Eligible Retained Income)

FDIC: 8/25 Quarterly Banking Profile Released (2Q 2020)

FHFA: 8/25 Adverse Market Refinance Fee Implementation now December 1

FDIC: 8/20 Webinar: Loan Forgiveness and Other Relative PPP Matters (FIL-77-2020)

Federal Reserve: 8/19 Minutes of the Federal Open Market Committee, July 28-29, 2020

SBA: 8/13 SBA Announces New Reduced 504 Loan Debenture Rates

Fannie Mae: 8/12 Lender Letter LL-2020-12 – New Adverse Market Refinance Fee

Federal Reserve: 8/11 Federal Reserve announces revised pricing for its Municipal Liquidity Facility

Federal Reserve: 8/10 Individual large bank capital requirements, effective October 1

LIBOR Transition Links

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 7/8: ARRC Releases a Tool to Help Firms Move Internal Systems and Processes away from LIBOR

ARRC 6/30: Further Details Regarding Its Recommendation of Spread Adjustments for Cash Products

ARRC 6/30: Recommended Fallback Language for Private Student Loans

ARRC 6/30: Updated Recommended Hardwired Fallback Language for Syndicated Loans

ARRC 6/5: ARRC Welcomes CFPB’s Updated Consumer Handbook and Proposed Rule Facilitating Transition Away from LIBOR

ARRC 5/28: ARRC Welcomes FNMA and FHLMC’s LIBOR Transition Playbook

ARRC 5/27: ARRC Announces Best Practices for Completing Transition From LIBOR

ARRC 4/17: ARRC Announces Its Key Objectives for 2020

ARRC: 4/8:  ARRC Announces Recommendation of a Spread Adjustment Methodology for Cash Products

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

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 (September) | Monthly, 5th business day

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

CNBC: The market isn’t convinced the Federal Reserve can achieve its inflation objective

“None of the 17 officials on the Federal Open Market Committee see inflation breaking the 2% barrier through at least 2023. That means that the current near-zero short-term rate environment likely will persist for years before any change in the current structure would occur.”

WSJ: Lawmakers Tangle Over Fed’s Muni-Market Rescue

“The idea was to show that the Fed stood ready to back the municipal market as a lender of last resort, rather than attract a flood of borrowers from it. So far, only two borrowers have tapped the facility for funding.”

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