US Economy and Credit Markets Ended Dec. 11, 2020

Longer-term Treasury yields fell more than shorter-term yields last week on new economic restrictions, while lawmakers continued to haggle over a second round of coronavirus aid without reaching an agreement. Lawmakers did however pass a stopgap spending bill that will keep the government funded for an additional week as talks on both fronts continue. Initial jobless claims rose sharply in the week ended December 5 to the highest level since September, coming in well above expectations. However, the University of Michigan's Consumer Sentiment Index improved in the two weeks ended December 9, mostly due to a more-favorable long-term outlook for the economy. The Fed holds its final meeting of the year this week and is widely expected to keep rates unchanged. It caps a busy year in which the Fed cut rates to near zero in response to the COVID-19 pandemic, which has helped push real yields, or what investors earn after inflation, on U.S. government debt below zero. Last week, the average U.S. investment-grade corporate bond yield also fell below expected inflation for the first time on record dating back to 2003. Major economic reports (related consensus forecasts, prior data) for the upcoming week include Tuesday: November Industrial Production MoM (0.3%, 1.1%), December Empire Manufacturing (7.0, 6.3); Wednesday: December 16 FOMC Rate Decision – Upper Bound (0.25%, 0.25%), December 11 MBA Mortgage Applications (N/A, -1.2%), November Retail Sales Advance MoM (-0.3%, 0.3%), December Preliminary Markit US Manufacturing PMI (55.9, 56.7); Thursday: December 12 Initial Jobless Claims (820k, 853k), November Housing Starts (1,530k, 1,530k); Friday: November Leading Index (0.4%, 0.7%).
Posted on Monday, December 14, 2020 @ 8:17 AM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.