Sector Update

September 28, 2020

Treasury yields declined in a flattening fashion last week with longer maturities falling by 4-5 bps and shorter maturities +/- 1 bp. The 2-10 spread closed last week 3 bps lower 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.

I read an interesting WSJ article this weekend, Inflation Is Already Here—For the Stuff You Actually Want to Buy that gave me a mild case of cognitive dissonance. I will let you assign appropriate weights, but divining inflation expectations is certainly part art and part science. I will easily concede no measurement of inflation is perfect and the Fed must use something. However, I think if you asked an “average consumer” about their impression of inflation – it’d be higher than measurements suggest.

This Morning

Stocks, gauged by S&P 500 Index, fell for the fourth week in a row. The S&P 500 was off 0.6% last week (after falling 0.6%, 2.5%, and 2.3% respectively the three prior weeks). So far this morning, equities are trying to break this trend and are up 1 – 1.5%. Treasury yields are largely unchanged and the 2-10s is where it closed Friday at 53 bps.

Sector Commentary

Regulatory Links

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

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

Bloomberg: Treasuries Face High Bar for Yield Liftoff in Calmest-Ever Trade

“The 10-year yield has swung during the second half of 2020 between 0.50% and 0.79%. Even four straight weeks of sinking U.S. share prices only sparked a mild haven-bid for government debt. Nor did a week of historically large note auctions leave a lasting mark. Volatility in Treasuries has never been lower.”

WSJ: Inflation Is Already Here—For the Stuff You Actually Want to Buy

“The laws of supply and demand explain the divide in inflation between the stuff we want and the stuff we don’t. The outlook for inflation is divided too, between the obvious inflationary pressures and the obvious deflationary pressures, due to overall supply and demand.”

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