As of 1:30 am AST, on the eve of a vote on impeachment, bond yields stay relatively flat…

RatesFederal Reserve as of 11 January 2021Bloomberg as of 13 January 2021 1:00 am AST
Federal Funds Rate0.080.08
Prime Rate3.253.25
3-month Treasury0.080.08
2-year Treasury0.140.14
10-year Treasury1.151.12
30-year Treasury1.881.87
Source: Federal Reserve, Bloomberg

House votes resolution asking Pence to use 25th amendment to remove Trump

Last night the U.S. House of Representatives passed the following House resolution in its attempts to remove President Donald Trump prior to the end of his term. House Res 21 reads as following:

This resolution calls upon Vice President Michael R. Pence (1) to immediately use his powers under section 4 of the Twenty-fifth Amendment to convene and mobilize the principal officers of the executive departments to declare that the President is unable to successfully discharge the duties and powers of his office, and (2) to transmit to the President pro tempore of the Senate and the Speaker of thHouse notice that he will be immediately assuming the powers and duties of the office as Acting President.

Vice-President Pence has reportedly said that he does not intend to invoke the 25th Amendment. This means that the House will likely move to the next stage of its strategy which is to vote articles of impeachment against Mr Trump. Given the Democrats majority in the House, passage is expected.

The articles of impeachment would then move to the Senate for a trial. Indications are that, unlike last year’s attempt to remove the President from office via impeachment where a Republican-controlled Senate voted not to remove the President, there may be enough support on the part of Senate Republicans to find Mr Trump liable for “high crimes and misdemeanors”, the standard under the U.S. Constitution for removal. Senate majority leader Mitch McConnell has signaled that Mr Trump’s behavior, where allegedly encouraged supporters to march last week on the Capitol, amounted to an impeachable offense.

The establishment wing of the Republican Party, now in damage control as a result of the storming of the Capitol by Trump supporters and the resulting deaths of five people, would like nothing more than to move on from the Trump era and start laying the groundwork for the 2022 mid-term elections.

I don’t expect impeachment actions to have any bearing on pending policy actions designed to impact the economy. With only seven days left until the change in government, attempts to remove Mr Trump are designed to score political points with an electorate, a significant amount of whom believe the actions of individuals storming the Capitol amounted to an insurrection attacking the country’s representative institutions of democracy.

As of 9:46 am AST 3 December 2020, U.S. Treasury and Federal Funds rates indicate money is still cheap in America …

As of 9:46 am AST 3 December 2020, U.S. Treasury rates and Federal Funds rates are as follows:

3-month: .08%

6-month: .09%

12-month: .10%

2-year: .16%

10-year: .94%

30-year: 1.69%

Fed Funds Rate: 0.08%

Federal Reserve Target: 0.25%

Prime Rate: 3.25%

Source: Bloomberg

Major political/legal events impacting currencies

Federal Reserve releases its Beige Book finding moderate, modest US expansion

Yesterday, the Board of Governors of the Federal Reserve System released its final Beige Book for 2020.  The Federal Reserve determined that US economic expansion is either moderate or modest at best.  A number of districts, including the Philadelphia district, have observed a slow down in growth with a spike in COVID-19 cases since early November.  Banks expect the number of borrower delinquencies to increase in 2021.  

Source: Board of Governors of the Federal Reserve System

So far, a quiet bond market …

As of 10:14 am AST 30 November 2020, U.S. Treasury rates and Federal Funds rates are as follows:

3-month: .08%

6-month: .09%

12-month: .10%

2-year: .15%

10-year: .85%

30-year: 1.58%

Fed Funds Rate: 0.08%

Federal Reserve Target: 0.25%

Prime Rate: 3.25%

Source: Bloomberg

Major political/legal events impacting currencies

On 27 November 2020, President Donald J. Trump nominated Brian P. Brooks as Comptroller of the Currency for a term of five years.  As Comptroller, Mr Brooks would be responsible for administering the United States’ national banking system as well as the branches of foreign banks doing business in the United States.  Mr Brooks is currently serving as acting Comptroller.  His nomination must be confirmed by the U.S. Senate.

Source: Executive Office of the President

Bond yields relatively unchanged in light of Yellen pick as Treasury secretary

As of 9:58 am AST 24 November 2020, U.S. Treasury rates and Federal Funds rates are as follows:

3-month: .08%

6-month: .09%

12-month: .10%

2-year: .16%

10-year: .86%

30-year: 1.58%

Fed Funds Rate: 0.08%

Federal Reserve Target: 0.25%

Prime Rate: 3.25%

Source: Bloomberg

Major political/legal event in the United States

Biden to nominate Janet Yellen for Treasury secretary

Axios reports that presumptive U.S. president-elect, Joseph R. Biden, will announce later today his choice of Janet Yellen as U.S. Secretary of the Treasury.  Ms Yellen, 74, served as chairman of the Board of Governors of the Federal Reserve System from 2014 to 2018.

Source: Axios

Treasury secretary seeks $455 billion from Federal Reserve in order to return to Congress …

As of 9:31 am AST 20 November 2020, U.S. Treasury rates and Federal Funds rates are as follows:

3-month: .06%

6-month: .09%

12-month: .10%

2-year: .16%

10-year: .83%

30-year: 1.55%

Fed Funds Rate: 0.08%

Federal Reserve Target: 0.25%

Prime Rate: 3.25%

Source: Bloomberg

Major political/legal event in the United States

Yesterday, the U.S. Department of the Treasury released the following:

Today U.S. Treasury Secretary Steven T. Mnuchin sent a letter to Chairman of the Federal Reserve Board of Governors Jerome Powell requesting a 90-day extension of the Commercial Paper Funding Facility (CPFF), the Primary Dealer Credit Facility (PDCF), the Money Market Liquidity Facility (MMLF) and the Paycheck Protection Program Liquidity Facility (PPPLF). 

“With respect to the facilities that used CARES Act funding (PMCCF, SMCCF, MLF, MSLP, and TALF), I was personally involved in drafting the relevant part of the legislation and believe the Congressional intent as outlined in Section 4029 was to have the authority to originate new loans or purchase new assets (either directly or indirectly) expire on December 31, 2020. As such, I am requesting that the Federal Reserve return the unused funds to the Treasury. This will allow Congress to re-appropriate $455 billion, consisting of $429 billion in excess Treasury funds for the Federal Reserve facilities and $26 billion in unused Treasury direct loan funds,” said Secretary Steven T. Mnuchin.

“In the unlikely event that it becomes necessary in the future to reestablish any of these facilities, the Federal Reserve can request approval from the Secretary of the Treasury and, upon approval, the facilities can be funded with Core ESF funds, to the extent permitted by law, or additional funds appropriated by Congress. I am deeply honored to have worked on executing these programs and hope that because of our collective actions, Congress will show similar trust in Federal Reserve Chairs and Treasury Secretaries in the future.”

Source: U.S. Department of the Treasury

Foreign ownership of US Treasurys fall in September. Downtick in longer term rates …

As of 9:25 am AST 18 November 2020, U.S. Treasury rates and Federal Funds rates are as follows:

3-month: .08%

6-month: .08%

12-month: .11%

2-year: .17%

10-year: .85%

30-year: 1.59%

Fed Funds Rate: 0.08%

Federal Reserve Target: 0.25%

Prime Rate: 3.25%

Source: Bloomberg

Major political/legal event in the United States

Treasury releases data on foreign investment in the United States

Yesterday, the United States Department of the Treasury reported that “in September of all net foreign acquisitions of long-term securities, short-term U.S. securities, and banking flows was a net TIC outflow of $79.9 billion.  Of this, net foreign private outflows were $40.3 billion, and net foreign official outflows were $39.6 billion.”  The Treasury International Capital report also noted that there was a decline in foreign investor ownership of Treasury bills in the amount of $30.3 billion in September 2020.

Yields increasing on longer term Treasurys

As of 9:22 am 11 November 2020, U.S. Treasury rates and Federal Funds rates are as follows:

3-month: .09%

6-month: .10%

12-month: .11%

2-year: .18%

10-year: .98%

30-year: 1.74%

Fed Funds Rate: 0.08%

Federal Reserve Target: 0.25%

Prime Rate: 3.25%

Source: Bloomberg

Major event in the United States

Treasury announces tax deduction for pass-through entities

Last Monday, the U.S. Department of the Treasury announced rule changes that clarify that State and local income taxes imposed on and paid by a pass-through entity are allowed as a deduction by the pass-through entity in computing its non-separately stated taxable income or loss for the taxable year of payment. 

Source: Treasury.gov

Bond rates, Fed Funds rates … and ballot counting close to its climax

As of 10:57 am 5 November 2020, U.S. Treasury rates and Federal Funds rates are as follows:

3-month: .09%

6-month: .09%

12-month: .12%

2-year: .15%

10-year: .77%

30-year: 1.54%

Fed Funds Rate: 0.08%

Federal Reserve Target: 0.25%

Prime Rate: 3.25%

Source: Bloomberg

Major event in the United States:  Ballot counting is continuing in the U.S. presidential elections. Democratic presidential candidate Joseph R. Biden reportedly has 264 unofficial Electoral College votes while Republican candidate Donald J. Trump has 214 unofficial Electoral College votes.

The official declaration of President-Elect is scheduled for 14 December 2020.

Today, the Board of Governors of the Federal Reserve System concludes their Federal Open Market Committee meeting.  The Board will report its fed funds rate decision at 2:00 pm EST.

Source: Bloomberg, Federal Reserve

Bond yields as Joe Biden inches closer to winning more Electoral College votes.

As of 3:14 pm 4 November 2020, U.S. Treasury rates and Federal Funds rates are as follows:

3-month: .09%

6-month: .10%

12-month: .12%

2-year: .14%

10-year: .76%

30-year: 1.54%

Fed Funds Rate: 0.08%

Federal Reserve Target: 0.25%

Prime Rate: 3.25%

Source: Bloomberg

Major event in the United States:  Ballot counting is continuing in the U.S. presidential elections. Democratic presidential candidate Joseph R. Biden is projected to win 227 Electoral College votes while Republican candidate Donald J. Trump is projected to garner 214 Electoral College votes.

In addition, the Board of Governors of the Federal Reserve System conclude their Federal Open Market Committee meeting tomorrow.

Source: Reuters