21 May 2020

1) The Federal government is moving to address the record deficits that America has amassed. One method is to stretch out the time over which the deficit is paid off. Part of that plan is the reinstating of the 20 year bond, which was last issued in 1986. The Feds will auction off $20 billion dollars worth of bonds Wednesday, with an expected return of 1.21% verses 0.70% for the 10 year bonds and 1.42% for the 30 year bonds. The government is also considering 50 and 100 year bonds, but there doesn’t seem to be any demand for such financial instruments. It’s expected that the deficit will be $3.4 trillion dollars for fiscal 2020 and $2 trillion dollars for 2021.

2) The CBO (Congressional Budget Office) estimates the nation’s unemployment rate will exceed 15% through September then remain above 11% for the rest of the year. For 2021, they estimate an average of 9.3%. For the second quarter of 2020, the labor market is projected to see the steepest declines since the 1930’s. These high unemployment rates are expected to persist despite lawmakers’ efforts to counter with injections of cash into the economy. Further layoffs are expected despite the $660 billion dollar Paycheck Protection Program, but a partial rebound is possible in the last three months of the year, with as much as 30% of laid off workers being rehired.

3) Housing sales are way down, the lack of inventory has propped up prices with bidding wars from the limited availability of properties. The health guidelines have made it more difficult to market homes, another fallout of the pandemic. Since the pandemic began, the demand has fallen off, with the number of sellers also contracting, therefore the limited availability of properties. Despite the economic uncertainty, the supply shortage prior to the Covid-19 crisis still remains. Nevertheless, the housing market has cooled, with sales of existing homes projected to fall 20% in April compared to March, which had a 8.5% drop. Construction of new houses is down as contractors wait out the virus. While loan interest rates are low, lending institutions have tightened up their loan standards.

4) Stock market closings for – 20 MAY 20:

Dow 24,575.90 up 369.04
Nasdaq 9,375.78 up 190.67
S&P 500 2,971.61 up 48.67

10 Year Yield: down at 0.68%

Oil: up at $33.52