The Weekly Report

  • Rates fell slightly on the week, as worries about the depths of second quarter spending overcame supply concerns. Aside from the acceptance of the Treasury’s larger auctions, there were no important technicals to record. So far, the WI 20-yr UST is trading in a constant relationship to the 30-yr, with a slope of 20bp. That is about 5bp tight to the curve prior to WI trading on next week’s new arrival.
  • Stock market unity suffered compared with early May results. Tech stocks are more than solid despite one day of tepid support. Volatility and losses in other sectors were noticeable and damaging. Credit spreads widened 5bp in Europe and 3bp in the US. The dollar climbed every day except today as it failed in an attempt at a second quarter high.
  • Chair Powell was forceful in his appearance on Wednesday. The cover chart considers how much fiscal stimulus can bolster the economy when Q2 government spending is virtually guaranteed to rise to levels (relative to GDP) not seen in three decades. Is there a limit to the effectiveness of stimulus as it enters new territory? Classic economics say no, but the chart does raise its hand to ask the question. Powell talks with 60 Minutes on Sunday and the Senate Banking Committee on Tuesday.
  • Inside, an extensive update on COVID-19 statistics and analysis. That’s followed by Inflation Lab’s review/charts from April’s historic CPI report. Last, a valuable update on household finances, with a look back at how confident (over confident?) consumers were in Q1. Chris Low examines April’s CPI and retail sales in the forthcoming Economic Weekly.

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