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Market Update

$1.9 trillion Coronavirus relief bill plows forward and crude continues to surge

February 8, 2021
  • dustin gjellum headshot


    Dustin Gjellum

    Accounting Advisory

    Corporates | Denver, CO


The biggest news from last week came Friday as the $1.9 trillion COVID-19 relief package, including $1,400 direct payments to millions of Americans, passed an updated budget resolution in the House. This paves the way for passage prior to the March 14 expiration of current unemployment benefits.

Also on Friday, January nonfarm payroll numbers were released, which showed the U.S. gaining 49 thousand jobs, falling short of the +100 thousand expectations. Unemployment fell by 0.4% to 6.3%. Interestingly, the decrease in the unemployment rate appears to be driven more by a drop in the labor force (down approximately 400 thousand) rather than a drop in the number of unemployed individuals. The total labor force is currently down 4.3 million from this time last year.

Markets ended the week up from where they began as optimism surrounding coronavirus relief outweighed weaker than expected jobs numbers.

Interest Rates

As the unemployment rate dipped, treasury rates rose, with the 10-year treasury closing the week at 1.17%. This was, up approximately 10 basis points from the week’s opening and more than double the levels we’ve seen over the last six months. Pre-issuance hedging has been a hot topic of conversation amongst Chatham’s corporate client base, as the desire to mitigate the volatile environment and lock in future issuances at what are still extremely low rates has been top-of-mind for treasury teams. The spread between the 10- and 2-year treasury rates was at its highest levels since 2017, signaling the potential for inflation starting to rise.

Foreign Currency

The EUR-USD exchange rate dipped below 1.20 for a short time Friday as the dollar had one of its strongest weeks in the past six months. Due to the spread between EUR and USD, swapping from dollars to euros with a cross-currency swap, while utilizing a preferred hedge accounting approach, continues to be a popular strategy as companies can see a pickup in earnings of approximately 1%.

(Related insight: Watch the on-demand webinar, "Semiannual market update for corporations.")


Crude, and most other commodities, continue to rebound from the Q1 2020 lows and the November sell-off as the market’s optimism around vaccine rollouts continues to grow. Aluminum, steel, and lumber have nearly doubled in price, while WTI and Brent are at 12-month highs and closing in on the $60/BBL mark. Refined products are also up sharply and the market contango we saw in early 2020 has reverted into slight backwardation, allowing clients wishing to hedge short positions an opportunity to layer in hedges at a discount to spot.

(Related insight: "Using commodity collars to manage market volatility")

About the author


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

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.