30-year US mortgage rate falls to new low | Study: US firms bore cost of trade dispute with China | US economy in Q1 shrank faster than estimated
29 May 2020
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A number of loans from the US government's Paycheck Protection Program have gone to companies that use offshore tax havens to reduce or eliminate tax liabilities. Of the 110 public companies that each received emergency aid of $4 million or more, 12 have used offshore entities to reduce tax liabilities and seven paid no tax at all for the past year, according to an analysis of public data.
Full Story: Reuters (28 May.) 
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The average rate for a 30-year fixed-rate mortgage in the US has fallen to 3.15%, down from last week's 3.24% and the lowest figure in Freddie Mac statistics dating to 1971. The Federal Reserve is keeping its key interest rate close to zero and is purchasing mortgage-backed bonds to keep borrowing costs low.
Full Story: BNN Bloomberg (Canada) (28 May.) 
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The US-Chinese trade dispute reduced the market value of US publicly traded companies by $1.7 trillion and will cut their investment growth rate by nearly 2 percentage points by the end of 2020, according to a report by economist Mary Amiti, a vice president at the Federal Reserve Bank of New York, and Columbia University's David Weinstein and Sang Hoon Kong. Higher US import duties were borne almost entirely by US firms, the report said.
Full Story: BNN Bloomberg (Canada) (28 May.) 
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The US economy in the first quarter contracted more sharply than a previous estimate of 4.8%, according to the Commerce Department. The GDP fell at a 5% annual rate, the biggest quarterly contraction since an 8.4% drop in 2008.
Full Story: CNBC/The Associated Press (28 May.) 
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Market Activity
Asian-Pacific stock markets were mixed Friday as traders looked toward possible market reactions to China's security bill for Hong Kong. Japan's Nikkei 225 gave up 0.2%; China's Shanghai Composite rose 0.2%; Hong Kong's Hang Seng Index lost 0.7%; Australia's S&P/ASX 200 dropped 1.6%; South Korea's Kospi gained 0.1%; and India's Sensex rose 0.7%.
Full Story: CNBC (29 May.),  The Economic Times (India) (04 Jun.) 
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Companies have tapped $1 trillion worth of funding this year at an unprecedented pace due to Federal Reserve support, but almost 1,300 issuers rated from AAA to B- by S&P Global Ratings are at risk of downgrade, according to S&P. "Generally, we expect heavy credit erosion in coming months as issuers, especially those in the lower-rated spectrum come under heavy fire from poor earnings, continued difficulties in managing cost structures, and market volatility creating limited funding opportunities," says S&P credit markets research chief Sudeep Kesh.
Full Story: BNN Bloomberg (Canada) (28 May.) 
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US money market funds are responding to a drop in yields on short-term debt by cutting or suspending fees to prevent yields from going negative.
Full Story: Financial Times (subscription required) (28 May.) 
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24 Hour Fitness is looking for a bankruptcy loan of as much as $200 million to allow the US gym chain to remain in operation if it seeks bankruptcy protection, sources said. The company has had difficulty servicing the $1.5 billion debt it assumed in a leveraged buyout in 2014.
Full Story: The Wall Street Journal (tiered subscription model) (28 May.) 
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Economics
US consumption of renewable energy topped its use of coal last year for the first time since 1885, according to the US Energy Information Administration. Coal consumption in 2019 fell 15% while use of renewable energy rose 1% from 2018, the agency reports.
Full Story: OilPrice (UK) (28 May.) 
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The White House has decided against releasing a revised economic forecast this year. A senior administration official said the underlying data is so uncertain, the update would not provide a meaningful view of a possible recovery.
Full Story: The Associated Press (28 May.) 
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At least 2.1 million US workers lost their jobs due to the coronavirus last week, despite businesses reopening throughout the country. The tally brings the number of Americans who have filed for jobless benefits since shutdowns began in mid-March to 41 million.
Full Story: The Associated Press (29 May.) 
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More than two months after the Federal Reserve's promise of emergency loans triggered a market rebound, an estimated $95 billion of $2.6 trillion available has been disbursed.
Full Story: Financial Times (subscription required) (27 May.) 
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Geopolitical/Regulatory
The US House has passed a bill that would extend the time for businesses to spend money received under the Paycheck Protection Program to 24 weeks from eight weeks. A separate bill under consideration in the Senate would give borrowers 16 weeks to use the money.
Full Story: Reuters (28 May.) 
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Market participants are becoming concerned about the lack of progress in Brexit talks after the latest round of EU-UK negotiations ended with little agreement on any issue. The financial-services sector is basing its planning on a no-deal Brexit, said Rob Moulton, a partner at the Latham and Watkins law firm.
Full Story: Practice Insight (28 May.) 
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The People's Bank of China poured 300 billion yuan into financial markets Friday and a net total of 670 billion yuan over the past seven days to provide additional liquidity, according to a statement on its website and third-party calculations. The central bank also held its 7-day reverse repurchase rate steady at 2.2%.
Full Story: Reuters (28 May.) 
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Michael Saunders of the Bank of England's Monetary Policy Committee has offered a gloomy assessment of the UK's recovery from the coronavirus pandemic and has said stimulus must be increased. "It is safer to err on the side of easing somewhat too much, and then if necessary tighten as capacity pressures eventually build, rather than ease too little and find the economy gets stuck in a low-inflation rut," he said.
Full Story: BNN Bloomberg (Canada) (28 May.),  Reuters (28 May.) 
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Financial Products
iShares has brought to NYSE Arca an exchange-traded fund that invests in Treasury securities with no more than three months left to maturity. The iShares 0-3 Month Treasury Bond ETF is linked to the ICE 0-3 Month US Treasury Securities Index.
Full Story: ETF (28 May.),  BNN Bloomberg (Canada) (28 May.) 
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