Congress passes another spending bill

April 27, 2020 Chatham Financial

Prior week summary

The major U.S. equity indices fell last week, snapping a two-week streak of gains, as fears of a prolonged global slowdown, heightened by turmoil in the global oil market, soured investor sentiment despite the passing of a $484B federal spending bill and reports of several states easing lockdown restrictions. As of Sunday evening, the global infection count sits just under three million confirmed cases with nearly one million cases reported in the U.S. While the infection count continues to rise in the U.S., increasing nearly 25% in the last week, many have been encouraged by the declining hospitalization rate in several of the hardest-hit areas, including in the epicenter of the U.S. outbreak, New York City. Giving a boost to sentiment, several states in the U.S., namely Georgia, Oklahoma, and Alaska, began “reopening” for business over the weekend, allowing select non-essential businesses to operate with social distancing practices in place, and New York Governor Andrew Cuomo indicated that a phased reopening of New York could begin as early as May 15. On Capitol Hill, lawmakers passed the fourth virus-related spending package, a $484B bill that focuses on providing relief for small businesses and hospitals. The deal plans to provide $310B to the Paycheck Protection Program and $75B to hospitals and healthcare providers, as well as, $25B toward improving COVID-19 testing capabilities and availability. Speaker of the House Nancy Pelosi suggested that a fifth spending package is on the horizon saying, “There will be a bill, and it will be expensive. And we look forward to doing it as soon as possible because jobs are at stake, protection of our people, the health and well-being of the American people are at stake.”

The economic data releases for the week highlighted the significant impact the COVID-19 outbreak has had on economic activity in the U.S. The IHS Markit flash manufacturing PMI fell to 36.9 in April, well below the 48.5 reading in March, and the IHS Markit flash services PMI fell to 27.0 in April, the lowest level ever recorded. The latest updated data on the housing sector, new and existing home sales, pointed to a sharp decline in March recording a 15% and 8.5% month over month decline, respectively. All eyes were on the crude oil market on Monday as the expiring May WTI futures contract fell below zero, falling to nearly -$40/barrel intraday, as supply imbalances caused a shortage of storage capacity. The slide in oil prices continued throughout the week with the June WTI futures contract trading just under $13/barrel as of this morning.

The look forward

Market participants are gearing up for a busy week of economic data releases as updated figures on first-quarter GDP, ISM Manufacturing Index, jobless claims, construction spending, and consumer spending, among others, dot the economic calendar. The FOMC will hold its two-day policy meeting on Tuesday and Wednesday.

Rates snapshot

 

Market implied policy path (Overnight indexed swap rates)

Source: Chatham Financial

 


Disclosures

Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit chathamfinancial.com/legal/notices/.

Transactions in over-the-counter derivatives (or “swaps”) have significant risks, including, but not limited to, substantial risk of loss. You should consult your own business, legal, tax and accounting advisers with respect to proposed swap transaction and you should refrain from entering into any swap transaction unless you have fully understood the terms and risks of the transaction, including the extent of your potential risk of loss. This material has been prepared by a sales or trading employee or agent of Chatham Hedging Advisors and could be deemed a solicitation for entering into a derivatives transaction. This material is not a research report prepared by Chatham Hedging Advisors. If you are not an experienced user of the derivatives markets, capable of making independent trading decisions, then you should not rely solely on this communication in making trading decisions. All rights reserved. 20-0132

Previous Article
U.S. economy contracts in the first quarter
U.S. economy contracts in the first quarter

The major U.S. equity indices moved lower on the week as weak domestic economic data and rising tensions be...

Next Article
Equities rise amid weak economic data
Equities rise amid weak economic data

Despite weak domestic economic data, the three major U.S. equity indices moved higher for a second consecut...

×

Subscribe to Chatham's Weekly Market Insights

First Name
Last Name
Company Name
!
Thank you!
Error - something went wrong!