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Market Update

Treasuries, crypto, and oil bring us into 2021

January 11, 2021


The Georgia Senate election results were finalized during a tumultuous week, along with the official certification of Joe Biden as the next U.S. President.

Political landscape

The Georgia Senate election results were finalized during a tumultuous week, along with the official certification of Joe Biden as the next U.S. President. With a Democratic majority in the House of Representatives and what some view as an effective majority in the Senate, there appeared to be the prospect of additional stimulus. However, these hopes hit a potential roadblock Friday with West Virginia Senator Joe Manchin vehemently opposing a new round of stimulus checks.


December nonfarm payroll numbers were published this week, showing a loss of 140,000 jobs, largely missing the expected addition of 50,000 jobs. Employment losses in the leisure and hospitality sector drove the negative jobs report, motivated by the second wave of lockdowns.

Interest rate environment

While core inflation figures remain well below the Federal Reserve’s targeted 2.0% average, we rang in the new year with the 10-year break-even inflation rate breaching 2.0 percent, a level not seen since late 2018. This is a measure of the market’s expectation for inflation over the next decade. This breakout, along with the election results, drove both the 10-year treasury yield and 10-year swap rate above 1% for the first time since March 2020. Despite the upward trend in the 10-year treasury yield since the beginning of the year, Federal Reserve Vice Chair Richard Clarida spoke on Friday, January 8, and expressed his expectation that the current pace of purchases will be maintained through 2021. For context, that currently stands at $120 billion per month, part of which is a minimum of $80 billion in Treasuries. Given the Federal Reserve’s expressed intention of remaining in the markets until the U.S. hits its employment and inflation targets, corporations may still wish to consider locking in rates for future debt issuances.

(Related insight: Read “COVID-19 impacts on future debt issuances”)

Currency environment

The key currency theme for 2020 was the U.S. dollar’s decline relative to all other major currencies.

However, the elephant in the currency room is the breakout of Bitcoin. This week, the cryptocurrency broke past $40,000, subsequently falling to $32,000 Monday morning. The previous rally seen in late 2017 was primarily driven by retail investors. This current run, fueled by inflation concerns and pure asset diversification interests, appears to have the added backing of institutional investors and some corporations. Most notably, Massachusetts Mutual Life Insurance and Square who invested $100 million and $50 million (both amounts not material to the institutions), respectively, into the crypto currency.

As companies embrace 2021 planning and navigate a post-Brexit world, along with a new administration and a continuing battle with COVID, many are evaluating whether their FX risk hedging programs are continuing to meet their needs, or whether changing market dynamics have impacted their global risk profile.

(Related insight: Register for the webinar, “An Altered Currency Landscape and Impact to Corporate Hedging Programs” on January 21)


The oil producer group OPEC announced this week that members intend to keep production at current levels, rather than increasing the supply, prompting both major oil indices, Brent and WTI, to begin trading above $50 per barrel. Prices remain below pre-pandemic levels (both traded above $60 in January 2020), but there is optimism for the year as global vaccinations would suggest an increase in demand for oil.

The week ahead

Further economic indicators and earnings data will be rolling out this week. Consumer price inflation data is due Wednesday, with the expectation of a slight increase. The large U.S. banks will be posting fourth quarter earnings Friday.

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

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