Stimulus, the Fed, and the Virus

Investors are weighing a variety of variables this morning as both credit and equity markets seek direction. The stalemate over what the next phase of fiscal stimulus might look like has become even more intransigent with the political environment seeming to become more unpredictable by the day. Treasury Secretary Mnuchin, Fed Chairman Jerome Powell, and others will be testifying before the House today as they deliver their take on things to lawmakers. Much lobbying for more fiscal stimulus is expected from these policy-makers. Adding to the uncertainty is the unsettling rise in Europe’s COVID cases which has sparked concerns over the possibility of a re-lockdown in some parts of the continent. All this while the domestic case-count has experienced its own spikes.

On the data front, Existing Home Sales for August will be released later this morning and a rise of about 2.4% on an annualized basis is expected. The Richmond Fed is also expected to report that its Manufacturing Index slipped to 12 this month from August’s value of 18. The Treasury will also be conducting an auction today for $52B Two-Year notes.

For now, Treasury prices are mostly unchanged with the Two-Year yielding around 13 basis points, the Ten-Year rests at 0.67%, and the Long Bond is hovering just over 1.40%. Gold continues to drift lower with this morning’s slide of $4 taking the per/ounce price to around $1,908. Crude oil has slipped below $40 while equity futures look slightly disgruntled.