Weekly jobless claim data released | San Francisco Fed Hosts Innovation Office Hours (Governor Lael Brainard Speaks) | Pandemic prompts firms to offload noncore assets
August 13, 2020
SIFMA SmartBrief
News on the capital markets
Morning Bell
Political deadlock regarding relief for US state and local governments is increasing risk in credit markets, Morgan Stanley Wealth Management says. "Failure to secure aid for state and local governments presents downside risk for bonds of low credit quality at a time when investors are willing to move down the credit curve," according to a note by strategists Scott Helfstein and Monica Guerra.
Full Story: Bloomberg (tiered subscription model) (8/12) 
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3 Dimensions for Safely Reopening the Workplace
While some people are just now returning to work, others have had people in their facilities for some time. Don't miss your chance to explore the questions every organization needs to answer to manage the crisis and get expert advice on the most important factors to set your company up for what's next. Register here.
Happening Today
Industry News
Companies have offloaded $391 billion in noncore assets this year as a result of the coronavirus pandemic, according to Refinitiv. "Some are selling simply because they need to fix their balance sheets, others are selling because they can no longer afford to invest in a business that is not core and others are selling to invest in higher-margin businesses," says Frank Aquila, global head of mergers and acquisitions at Sullivan & Cromwell.
Full Story: Barron's (subscription required) (8/12) 
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Strategists at JPMorgan Chase are among those who question whether the market rotation in favor of value stocks will prove sustainable. They cite China's unwillingness to provide further stimulus, as well as the fact that further depreciation of the US dollar is unlikely.
Full Story: Bloomberg (tiered subscription model) (8/12) 
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The Federal Reserve's spate of mortgage buying has sent rates plummeting and prepayments soaring, causing banks to reevaluate the accuracy of valuation models for mortgage-backed securities. Analysts at Bank of America and Morgan Stanley say those two factors have created uncertainty.
Full Story: Bloomberg (tiered subscription model) (8/12) 
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A $38 billion auction of the 10-year Treasury has brought stabilization to the government bond market. The 10-year yield closed at 0.669% Wednesday, the highest level since July 6.
Full Story: The Wall Street Journal (tiered subscription model) (8/12) 
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Washington Roundup
Three Federal Reserve policymakers expect slow economic recovery in the US until the coronavirus is brought under control. They say Americans must learn to live with the virus for at least the next few months.
Full Story: Reuters (8/12),  The Hill (8/12),  Bloomberg (tiered subscription model) (8/12),  The Wall Street Journal (tiered subscription model) (8/12) 
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Global Update
Major state-run banks in China are trying to comply with US sanctions on Hong Kong officials, including CEO Carrie Lam, to avoid losing access to US dollar funding and foreign networks. Foreign banks operating in Hong Kong are suspending accounts or subjecting clients to stronger due diligence.
Full Story: Bloomberg (tiered subscription model) (8/12) 
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The Bank of Japan aims to lessen the impact of negative interest rates by offering banks incentives worth hundreds of millions of dollars in return for continued lending to the private sector. The offer has incentivized banks to take loans worth $250 billion since April, prompting economist Takehiro Noguchi to say, "This is one of the most effective policy moves the BoJ has made in recent years."
Full Story: Reuters (8/13) 
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OPEC has lowered its 2020 production estimate, stating that falling demand for oil may have a larger impact than previously forecast, with repercussions for the global economy. However, OPEC maintains its expectation of a record-breaking revival in 2021.
Full Story: The Wall Street Journal (tiered subscription model) (8/12) 
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Asset Management Report
Wells Fargo, Federated Investors and others are considering the launch of exchange-traded funds, according to company statements and filings. The shift to ETFs, which is fundamentally changing the asset-management industry, is being driven by factors including client demand and rule changes. T. Rowe Price and BNY Mellon entered the market this year.
Full Story: Bloomberg (tiered subscription model) (8/12) 
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Operations Update
The Basel Committee on Banking Supervision has established guidance on operational resilience for financial firms in different countries to use during pandemics, large-scale system outages or natural disasters. The Basel Committee is also seeking feedback on developing metrics for measuring resilience.
Full Story: Risk (subscription required) (8/13) 
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Data of the Day
The consumer price index increased 0.6% in July, with the rising cost of gasoline and auto insurance a major factor. Economists surveyed by Reuters had predicted a 0.3% increase.
Full Story: Reuters (8/12) 
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Perhaps the ultimate symbol of today's unprecedented times was the closing of the floor of the New York Stock Exchange on March 23. On May 26, NYSE partially reopened the floor. With over a month of trading now in the books, SIFMA Insights analyzed changes since our last report on the impact to NYSE's market share as well as overall trends for the first half of the year.
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SIFMA's Equity Market Structure Conference is going virtual! This virtual event will bring together sell-side, buy-side, retail and regulatory experts on Thursday, Sept. 17, from 11 a.m. to 3 p.m. EDT, to examine today's equity markets and the evolving regulatory framework that guides them. Participants will discuss US equity market structure in 2020, share regulatory perspectives, address the evolving equities market landscape, and more. Preview the program and register today.
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