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Early Risk-On Tone Loses Momentum

US TSYS SUMMARY

Mkts kicked off new wk w/ concerted risk-on tone, Tsys broadly weaker w/ equities climbing early overnight and holding gains into midmorning. Risk appetite supported by hopes of bipartisan breakthrough on relief stimulus.

  • * Grudging reversal started around midmorning. While a "48 hour" deadline for stim-deal given to WH by House Sp Pelosi over weekend, Sen maj/ldr McConnell's insistence on targeted relief soured hopes (w/"PPP loans, creates liability protection, more unemployment benefits, forgiveness of postal service loan, education assistance")
  • * Tsys pared losses but remained weaker in second half even as equities continued to extend lows, likely reacting to Bbg headline: "DEMOCRATS SAY DISAGREEMENT ON STIMULUS LANGUAGE REMAINS".
  • * Markets showed little react to multiple Fed speakers (Fed chair Powell discussed digital currencies; Bostic, Clarida, Kashkari, Harker all hummed party line), while thorny BREXIT negotiations continued. No noticeable market react, but underscores second half risk-off theme: "US IMPOSES SANCTIONS ON CHINESE FOR TIES TO IRAN," Bbg
  • * The 2-Yr yield is up 0.2bps at 0.1451%, 5-Yr is up 0.8bps at 0.3297%, 10-Yr is up 1.3bps at 0.759%, and 30-Yr is up 1.6bps at 1.5442%.

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