Vaccinations, stimulus talks, and Brexit lead the headlines in the final weeks of 2020
- December 14, 2020
Corporates | Denver, CO
SummaryPositive vaccine news has the equities market poised for another rally as futures are pointing up heading into this week. The 10-year Treasury and 5-year swap rate are floating around 0.90% and 0.42%, respectively as the markets open this Monday.
On Friday, the FDA granted emergency authorization for the Pfizer and BioNTech COVID-19 vaccine. By early this week, over 600 locations across the U.S. will begin vaccinating front-line healthcare workers and people who live and work in long-term care facilities. Expectations are that nearly 25 million people in this group will receive the vaccine by the end of this year, with the remainder of willing Americans vaccinated by mid-2021. Last week, the U.K. became the first country in the world to authorize Pfizer’s vaccine and began administering it to people over age 80 and long-term care workers, with the goal of vaccinating 800,000 people in the initial phase. The positive vaccine news has the equities market poised for another rally as futures are pointing up heading into this week. The 10-year Treasury and 5-year swap rate are floating around 0.90% and 0.42%, respectively as the markets open this Monday.
Although hope is on the horizon as the Pfizer vaccine rolls out and the Moderna vaccine nears authorization, COVID-19 cases continue to climb across the globe. The rates for positive cases, hospitalizations and deaths have tripped safety benchmarks in several states, which has led to controversial closings of restaurants. These restrictions on activity are contributing to an increase in initial jobless claims, which surged to 853,000 last week, up from 716,000 the week before. This puts even more pressure on lawmakers to pass another stimulus deal, which has been in a stalemate. Prospects for a deal pushed the equities market down on Friday. On the other side of the pond, the ECB has boosted their Pandemic Emergency Purchase Program (PEPP) by 500 billion euros up to 1.85 trillion.
Brexit negotiations continue to stumble as a no-deal Brexit remains a possible outcome. Unsurprisingly, the two sides have agreed to push trade talks yet again beyond the most recent deadline as they try to “go the extra mile” to find common ground on several key environmental, social, and labor issues. The news of delayed talks pushed the pound above $1.34, and the dollar continues its recent trend of weakening against most major currencies.
(Related insight: Read "Market volatility impacts FX markets")
In the commodity space, oil prices continue to rise as Brent Crude trends towards $50 per barrel. Many see this as a psychological milestone which, if broken through, may lead to an overall optimistic view of oil going forward. In metals, copper prices are at a 7-year high. Copper demand is expected to stay strong as society moves towards green initiatives, with Copper being a significant component in many renewable energy facilities.
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.20-0471
Our featured insights
Persistent inflation weighs on the market as energy prices continue to rise
Treasury yields lost recent gains last week despite continuing inflation as consumer prices rose 5.4% year-over-year. Energy prices continue to rise amidst high demand and supply constraints.
Non-core inflation strikes again
Despite many central banks’ transitory inflation perspectives, inflation returned this week as commodity and food prices continued to rise. The five-year breakeven inflation rate, a broad measure of the market’s long-term inflation expectation, hit its highest reading since May after rising 13...
Yields climb on Fed tapering bets
FOMC aftermath and fiscal policy wrangling combined to drive 10-year yields to their highest levels in three months, peaking at 1.55% this week, impacting borrowers and hedgers alike. Meanwhile, price pressures in the energy sector continued their upward march.
Treasury yields climb as Fed holds rates steady
The Fed holds short-term rates steady but indicates at least one rate hike in 2022 as U.S. economic recovery continues.
Inflation plateaus as commodities continue upward climb
August CPI data showed inflation declining slightly from its June 2021 peak, while in energy markets recent supply shocks continue to drive prices higher. Interest rates remain range bound as next week’s FOMC meeting approaches.
FX and commodities volatility continue despite continued reopenings
As global economies struggle with natural disasters and the surging COVID-19 delta variant, economic indicators are painting mixed stories about recovery. U.S. initial jobless claims hit a pandemic low, while the dollar’s strengthening trend may be wavering in response to a more bullish stance...
August nonfarm payrolls highlight week of mixed data
As the market continued to react to Federal Reserve Chair Powell’s remarks at the Jackson Hole Economic Symposium, August nonfarm payrolls grabbed headlines after falling short of expectations. Elsewhere, data came in mixed as the delta variant continues to weigh on increased demand.
4 questions to ask when evaluating treasury technology platforms
Treasury teams increasingly rely on technology platforms to automate routine tasks, improve accuracy, and inform strategic decisions surrounding working capital, liquidity, and financial risk management. With an ever-growing ecosystem of technology platforms available to treasury and accounting...