DelayinpandemicreliefandClinton'scampaign

The tussle between the Democrats and the Republicans on the contours of the new relief program continues as the two sides stick to their guns. The point of contention still remains the USD 600 per week unemployment benefit which the Democrats want to continue. The Republicans are however convinced that the generous amount stops people from getting back to work. With the pandemic end not yet in sight, the relief measures keep consumer sentiment afloat, hence reaching the deal assumes lot of importance. Not reaching the agreement has resulted in slight risk off which is visible in the emerging market equities and currencies.

In other important news, rating agency Fitch has revised the US outlook to negative from stable. The rating remains at AAA. The yields on government bonds though remain stable. The 10 year treasury yield currently trades at 0.54. The levels are close to life time lows if we discount the panic move on 9^th of March where the yields traded close to 0.3. Otherwise the movement in yields are representative of the counterintuitive world in which we live where the bond price rises even when the rating agency revises the outlook downwards.

In the US, the problems are not over yet as the all important elections are looming. Given that President Trump has indicated that he is not looking to delay the elections we are less than 100 days away. Generally the second term bid gives the incumbent a considerable edge against the challenger given that they have all the airwaves at their disposal. The last time a sitting president failed to get re-elected was in 1993 when Bill Clinton defeated the incumbent George Bush Senior. Readers would remember that at that time the US was fresh from its military victory in the Gulf but the slogan of Clinton’s campaign “It’s the economy , st…” resonated much better with the voters. An economy battered with corona is again becoming the major issue in the current election.

In the global round up, the Euro has taken a breather from the relentless rise as it trades at 1.1765 currently. Gold is firm at 1971$/oz. Brent crude trades at 43$/bbl.

Domestically, the Indian rupee and equities are down following the global trend. The 10 year bond trades at 5.84 mostly unchanged. On Friday the government auctioned 18000 Cr INR of new 10 year paper which saw the cut off at 5.77. Now all eyes are set on the monetary policy meeting which is scheduled for August 4 to 6.