Archives of “March 2020” month

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Bank of Canada cuts rates to 0.25%, launches QE program

  
  Analysis

BOC cuts to 0.25% from 0.75%

Poloz
At 0.75% before today the Bank of Canada was the highest among developed central banks. US T-bills were negative but Canadian equivalents still had a ‘decent’ yield at around 0.5% out to six months. That may have been a factor in the loonie’s strength this week but the currency is lower on this (although still much higher than it was at the start of the week).
USD/CAD is trading at 1.4140 from a low of 1.3390 earlier today.
USDCAD d
Meanwhile, oil continues to crater and is down 3.3% today. With global growth in big trouble, Canadian exports are going to be hard hit and the country is likely to fall into a tough recession.
What I worry about right now is the Canadian mortgage market and Canadian banks. Canada’s largest bank — RBC — was sued yesterday for putting a margin call on a REIT’s CMBS and plans to auction them off. Other banks haven’t taken those kinds of actions but RBC balked and you have to wonder if that’s just being predatory or if they are facing their own problems. The BOC yesterday also launched a plan to buy corporate bonds.

BOC launches QE and a commercial paper program

The Bank of Canada also crossed the threshold into quantitative easing today for the first time. They will buy ‘a minimum’ of $5B per week across the curve and will continue “until the economic recovery is well underway.”
They will also buying commercial paper in a separate program.

Tokyo governor confirms another 40 new coronavirus cases in the city today

  
  Analysis

Tokyo governor, Yuriko Koike, delivers a press conference

This is roughly consistent with the 41 new cases reported on Wednesday and the 47 new cases reported on Thursday. With little details being offered, it is tough to say how much more they are testing currently compared to a week ago.

But the increase today will bring the total number of confirmed cases to about 300 in Tokyo as the government mulls over whether or not to declare a state of emergency.

JP Morgan on the US: “We continue to believe that a recession has begun in March”

  
  Analysis
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JPM:
  • We expect unemployment to peak near 8.5%.
  • Our model of the risk of the recession beginning within one year based on the economic data jumped to 90% after the report
  • We continue to believe that a recession has begun in March
  • Additionally, the Transportation Security Administration has released daily data on the number of travellers passing through TSA checkpoints. The number of travellers was down 89% relative to last year through March 25

German Chancellor Merkel: Impact of coronavirus likely to be bigger than financial crisis

  
  Analysis

Also –

  • We have asked Euro zone finance ministers to work out within two weeks the technical details of bailout fund credit lines for euro zone to fight coronavirus
  • for Germany, ESM bailout fund is the main instrument to help other European countries in coronavirus crisis
  •  asked on Eurobonds, says ESM is giving enough scope to react without giving up fundamental principles
Comments too from US president Trump:
  • Had a great meeting with G20 leaders

3 reasons why USD/JPY is heading back down to 105

  
Analysis, Forex
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A note via ING forecasting lower for USD/JPY, to 105 in three months

(1) Japan’s GPIF probably will not pour money into overseas bonds when $/JPY is above 110
(2) the rally to 112 was largely down to USD funding strains, which should reverse into April
(3) Japan’s large current account surplus will see JPY favoured in a recession.
Its a detailed note, but this snippet on point2:
  • Amongst many fire-fighting measures, the Fed and the US Treasury have since re-introduced schemes to support the CP market directly (CPFF & MMLF) and measures to support investment grade corporate issuance (PMCCF and SMCCF)
  • Along with the promise for unlimited QE, the Fed has managed to introduce some calm into money markets
  • We expect even calmer conditions once the Japanese financial year-end has passed (March 31st) and the Fed starts its CPFF program in April. A turn-around in the basis swap should take some upside pressure off USD/JPY. 

US Treasury Secretary Mnuchin pours cold water on the idea of closing markets

  
Analysis, US Market
  Tags

There was a spate of calls for markets to close when stock were being hammered in previous weeks.

But those calls dissipated as markets continued to function despite the challenges.
Mnuchin now:
  • we’ll do all we can to ensure markets stay open
  • its not our preference to limit market trading hours
  • our preference is to maintain normal market operations

Major indices end the day with solid gains and at the highs

  
Analysis, US Market
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The Dow and S&P rises for the 3rd day in around.

Yesterday both the S&P index and the Dow closed higher for the 2nd day in a row. The NASDAQ did not join them as it fell in trading yesterday. However all 3 indices are closing higher in trading today with solid gains. The indices closed near/at the session highs.

The final numbers are showing:
  • S&P index rose 151.74 points or 6.13% at 2627.30
  • NASDAQ index rose 413.24 points or 5.6% at 7797.53
  • Dow industrial average rose 1351.62 points or 6.38% at 22552.17.
The final hour of trading – which has been very volatile of late – once again saw the major indices rock ‘n’ roll ‘n:
  • S&P index, was at 2594.44 at 3 PM ET. The high in the last hour reached 2637.01. The low reached 2574.92. That is a range of 63 points.
  • NASDAQ index was trading at 7686.41 at 3 PM. The high in the last hour reached 7809.82. The low extended to 7639.95. That is a range of 170 points.
  • Dow industrial average was trading at 22227.47 at 3 PM. The high in the last hour reached 22595. The low reached 21964.24. That is a range of 631 points in the last hour.

The indices are also closing well off there lows for the day (the major indices did not go negative today).  Looking at the % low, % high and % Close, the % lows for the indices reached:

  • S&P index, +1.02%
  • NASDAQ index, +1.06%
  • Dow industrial average, +1.07%
Of the lows from Monday:
  • The Nasdaq is up 17.77%
  • The S&P index is up 20.31%
  • The Dow is up 24.06%
Of course those gains are impressive, but understand the gains are off much lower levels. The major indices are still well off the highs for the year.
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