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LenderHub

SWBC's LenderHub blog is a one-stop resource for lenders.

 

Recent Posts

Will April Corporate Loan Showers Bring July Flowers?

The stimulus package is here! Well, almost here—the House of Representatives still has to pass it. In concert with the package, the Fed this week embarked on unlimited Quantitative Easing, taking their balance sheet to $5 trillion for the first time with massive purchases of Treasury notes and Agency MBS. The Fed has bought $50 billion Agency MBS per day since Monday.

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Market Commentary: Week of March 23, 2020

What Happened:

Last week was perhaps like no other week. On Sunday night the Fed tried shock and awe, slashing their policy rate to zero (0-.25%), adding trillions of new liquidity vehicles and announcing new Quantitative Easing measures, $500 billion Treasury notes and bonds and $200 billion Agency MBS.

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Market Commentary: Week of March 16, 2020

What Happened

Well, that all went sideways in a hurry. Fear, uncertainty and more fear ruled the markets last week. Any semblance of liquidity exited every market sector as the phrase from investors, “I didn’t know that could happen” actually happened. The 30-year Treasury bond traded at a price as high as 135.09 (yield of .70 %) and as low as 104.875 (yield of 1.78%). With regard to liquidity in the world’s most liquid market, Treasuries, the Exchange Traded Fund (ETF), TLT, which tracks Treasury bonds with maturities greater than 20 years found its price Thursday at a 5% discount to Net Asset Value.

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For the Fed, it's Time to Flip the Script

A little nonsense now and then is relished by the wisest men. – Willy Wonka

As our leaders in Washington DC bicker over a fiscal response to COVID-19, mostly coming up with ideas that look to win votes (payroll tax holidays, guaranteed sick leave for everyone, tax credits for affected companies) as opposed to actually saving the economy from a credit induced depression, it looks like it is on the Fed again to do the job. To that, the question is, just what does the Fed has left in its arsenal?

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Market Commentary: Week of March 9, 2020

What Happened:

The appropriate answer to “What happened last week?” could be, “What DIDN’T happen last week?” While not as scary as the week Lehman died, last week was right up there. As COVID-19 continued to spread both in the US and the rest of the world disrupting just about everything that drives the global economy, the Federal Reserve came with a 50 basis point inter-meeting cut to their policy rate on Tuesday.

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Market Commentary: Week of March 2, 2020

What Happened:

If it were a fight, they would have stopped it on Wednesday. The virus COVID-19 was all that mattered this past week as stocks were routed the most since the Financial Crisis, while multiple Fed rate cuts were priced in from, maybe 1 at the beginning of the week to probably 3 when the closing bell rang on Friday afternoon. Any asset that wasn’t a US Treasury note was for sale. The high-yield bond and loan market froze up. Liquidity is like oxygen, you only notice it when it is not there.

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Vulnerable

The discovery of the coronavirus, now named COVID-19, last month in Wuhan, China, and its subsequent spread out of China and around the world has caused great uneasiness and alarm.  On Tuesday, the US Centers for Disease Control and Prevention warned Americans to prepare for a coronavirus outbreak at home that could lead to significant disruptions of daily life, since hitting an all-time high last Wednesday, the S&P 500 has fallen 13% while the 10-year Treasury yield has fallen to a new all-time low of 1.17%. 

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"A Horrible Mess"

Reuters News reported.

In remarks prepared for a New York University financial conference, Jerome Powell, Federal Reserve governor, said this Libor doomsday scenario must be avoided considering that there are now “$150 trillion in outstanding U.S. dollar Libor contracts,” to end Libor, a benchmark lending rate used for everything from mortgages to interest-rate swaps, would be a “protracted, expensive and uncertain process,” warned Powell.

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