BMA Market Insights: RISK-ON As Investors Await Economic Stimulus Plan


Market Snapshot

Yields opening higher in the belly and long-end of the curve, after a tumultuous week in equities trading that carried through to negative gamma hedging in interest rates pushing corporate hedging costs higher. While rates are pushing higher at the moment, the past two weeks has seen little change in overall rates as investors await a firm directional catalyst from the Biden administration’s proposed $1.9 trillion fiscal spending plan. The 10-year UST is trading at 1.077%.

In precious metals trading, retail investors — largely from the WallStreetBets forum, have recently bid up Silver prices. Silver Futures on the Comex jumped as high as 13% to $30.35 an ounce. In commodities, WTI crude oil has recovered from the doldrums last year to currently trade at $52.455/barrel — a 0.50% daily change.

This week will bring a slew of Fed speakers who will likely debate the merits of cutting back its asset purchases and timing of interest rate hikes on the back of higher inflation. Last week, the FOMC kept interest rates close to zero and its $120 billion of monthly asset purchases unchanged. However, quietly and mostly going unnoticed, the Fed’s New York arm announced it would scale back interventions in short-term borrowing markets and stop one-month repo operations after February 9. Across the pond, the Bank of England is scheduled to release its report on negative interest rates. Some economists suspect the central bank will embrace negative interest rates without implementing them (at least not in the near term).

Friday will bring the highly anticipated U.S. January jobs report. Economists expect the unemployment rate to hold steady at 6.7% and a slight uptick in jobs growth after a loss of 140,000 jobs in December.

Upcoming Economic Data and Fed Speakers This Week:

  • Monday: Minneapolis Fed’s Neel Kashkari; Dallas Fed’s Robert Kaplan; Atlanta Fed’s Raphael Bostic and Boston Fed’s Eric Rosengren at conference
  • Tuesday: Kaplan; Cleveland Fed’s Loretta Mester
  • Wednesday: Kashkari; St. Louis Fed’s James Bullard; Philadelphia Fed’s Patrick Harker; Mester; Chicago Fed’s Charles Evans
  • Thursday: Kaplan; San Francisco Fed’s Mary Daly