Insights

During the summer months, the economy found its Covid-era footing. The nation, and indeed much of the world, learned to co-exist with the pandemic as infection rates declined from early peak and progress occurred in testing and vaccine development. Some segments of the economy were able to re-open at least partially, while others remain under siege. Virus-induced changes in lifestyles have created some economic winners – used car sales, suburban single-family housing, and online retail among them.

As the public health and economic fallout from Covid-19 continued, U.S. Treasury yields traded in a reasonably tight range during May. Ten-year yields stayed within a 12-basis point (bp) band, while 30-year yields kept to a 20 bp range. Twenty-year notes were issued by the federal government for the first time in many years, and the market gave the new paper a warm reception.  Ultimately, the 2- to 30-year yield curve slope steepened by 16 bps, as the short-end of the curve remained firmly anchored.

As of this writing, there have been no new fiscal programs enacted since the Phase 3 CARES Act on March 27. Congress spent a portion of last week debating an expansion of the CARES Act. The Senate finished the week at an impasse, attempting to add $250 billion to the Paycheck Protection Program (PPP). Democrats sought more money for hospitals and state and local governments in exchange for passing a Republican proposal for more small-business loan funding.