It’s All Relative; Trillions Here, Trillions There

It’s All Relative; Trillions Here, Trillions There

After a seemingly unending backup, U.S. Treasury yields are now in somewhat of a retreat from recent highs. The10-year Treasury yield retreated 2bps yesterday to 1.70%, totaling a loss of 5bps from a recent intraday high of 1.75% on March 18. The 30-year, meanwhile, fell 4bps yesterday to 2.40%, marking its first back-to-back down sessions since mid-February, according to Bloomberg data. This morning, the 10-year is down 4bps and the 30-year is down 3bps, currently trading at 1.66% and 2.37%, respectively, as of 9:09 a.m. ET.

Yesterday, Chairman of the Federal Reserve Jerome Powell spoke in a panel discussion at the BIS Innovation Summit focusing on the need to understand tech advances in a digital age. During the event, the Chairman reiterated the March FOMC meeting’s message of status quo for monetary policy. “We have no plans to remove monetary accommodation,” Powell said, as “the recovery is far from complete.” Despite an optimistic outlook for 6.5% growth in 2021 along with 2.4% inflation and a decline in the unemployment rate to 4.5%, Powell has been clear that the Committee will be patient and adjust policy only after realized improvement. In other words, no policy adjustments will be made in anticipation of stronger growth and rising prices, or based on a forecast for such alone.

Later today, at 12:00 p.m. ET, both Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen will testify before the House Financial Services Committee in Washington on the economic response to COVID. This will be their first joint testimony.

While the focus of the testimony will be on the U.S. and the recovery effort here at home, many lawmakers will no doubt raise concerns about the country’s resilience to a potential third-round wave of the virus as is being seen overseas. According to reports, a third wave of COVID is leading to renewed lockdowns in Europe with Germany, for example, going into a hard lockdown over Easter.

Here in the U.S., the vaccination initiative is well underway as more than 82M Americans, or 25% of the population, have received at least one dose, and 44M Americans, or 14% of the population, are already fully vaccinated. Of course, while 14% have been, that leaves 86% yet to receive the full vaccination, a reality that, coupled with the fear of a rising caseload here in the U.S. as seen overseas, could undermine some reopening plans. In New York, for example, the state is now pausing plans to boost restaurant capacity to 50%.

Yesterday, U.S. equities finished higher with the Dow rising 103.23 points, or 0.3%, the S&P 500 gaining 0.7%, and the Nasdaq climbing 1.2%. This morning, equities are down 0.3%, with the Dow currently trading at 32,510.00 as of 9:16 a.m. ET.

Overseas, European stocks are down 0.1% with the STOXX Europe 600 at 423.57 as of 9:17 a.m. ET.

The AstraZeneca vaccine, meanwhile, remains in focus with concerns the company may have provided the U.S. outdated information that gave an "incomplete" view about the efficacy of its vaccine, according to the U.S. Data Safety and Monitoring Board. Recall earlier this week, on Monday, the AstraZeneca vaccine was found to be 79% effective in a U.S. trial. An independent board, furthermore, found no safety concerns, indicating the shot prevented 100% of severe cases and deaths. According to reports, the findings were anticipated to pave the way for possible U.S. regulatory approval.

The positive findings, however, came just days after several European countries suspended use of the AstraZeneca vaccine due to concerns over potential side effects. Last week, following reports of rare blood clots, over a dozen countries including Germany, Italy and Spain opted to suspend the use of the vaccine. According to the European Medicines Agency (EMA), the risk is relative. In a statement issued last week, the EMA said that the benefits of the vaccine still outweigh the risks, despite the link to "rare blood clots with low blood platelets." Furthermore, as of last Friday, the European Union declared the AstraZeneca vaccine “safe and effective,” and said its use should continue.

In political news, while the details remain minimal, according to reports, the White House is preparing the next round spending package potentially totaling $3 trillion with a focus on “jobs and infrastructure.” As reported by CNN, the package is to be comprised of two parts: the first focused on infrastructure and clean energy, and a second focused on domestic and social issues. The infrastructure proposal would focus heavily on money for roads, bridges and rails, and would include hundreds of billions in spending for climate-related measures, as well as climate-related research and development. It also would include $100 billion for education infrastructure. The domestic economy piece of the plan would include key Biden campaign priorities such as universal pre-K, significant spending on childcare, care-giving and proposals designed to try and address portions of the workforce hit hardest by the pandemic economy.

According to the White House Press Secretary Jen Psaki, “President Biden and his team are considering a range of potential options for how to invest in working families and reform our tax code so it rewards work, not wealth. Those conversations are ongoing, so any speculation about future economic proposals is premature and not a reflection of the White House's thinking."

Yesterday, the Chicago Fed National Activity Index unexpectedly dropped from 0.75, revised up from 0.66, to -1.09 in February, the first decline since April. According to Bloomberg, the index was expected to rise to 0.72 in the second month of 2021. The Chicago Fed National Index draws on 85 economic indicators; a reading below zero indicates below-trend growth in the national economy and a sign of easing pressures on future inflation. In February, 34 of the 85 monthly individual indicators made positive contributions, while 51 made negative contributions.

Additionally yesterday, existing home sales dropped 6.6% in February from 6.66m to a 6.22m unit pace, a six-month low. According to Bloomberg, existing home sales were expected to decline 3.0% in the second month of the year. Single family sales fell 6.6%, and multi-family sales declined 6.7%. Year-over-year, existing home sales rose 9.1% in February, following a 23.1% increase in January. From a price standpoint, the median cost of a previously owned home rose 15.8% in February from a year earlier to $313k, matching the all-time high of $313k in October.

This morning, new home sales dropped 18.2% in February from 948k, revised up from 923k, to a 775k unit pace, a nine-month low. According to Bloomberg, home sales were expected to decline 5.7% in the second month of 2021. Year-over-year, sales rose 8.2% following a 22.5% increase in January. Additionally, the months’ supply of new homes rose from 3.8 to 4.8 months. And, from a price standpoint, the median cost of a newly constructed home fell 1.1% in February from the month prior to $349k. Year-over-year, however, new home prices increased 5.3% following a 7.4% increase the month prior

Also this morning, the Richmond Fed Index rose from 14 to a reading of 17 in February, more than the expected rise to 16, according to Bloomberg, and a three-month high.

Tomorrow, durable goods orders are expected to rise 0.6% in February, following a 3.4% gain the month prior.

-Lindsey Piegza, Ph.D., Chief Economist


BRAND JONSECK

I'm an entrepreneur. I help people manage businesses big/small. I give consulting advice on manufacturing, engineering, commodities, and so much more. I help companies buy/sell electrical Wire and Cable. I love dogs ??

3 年

Thank you, Lindsey.

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