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Stimulus and Fed Moves Calm Market, Push Yields Lower

Longer term yields moved lower this week while negative rates on the short end of the curve rose back above zero as volatility receded from the markets.  Treasury note yields declined by as much as ten basis points on long end of the curve with two- and three-year yields dropping by three bps. 

The lower volatility was partially the result of the $2Tn fiscal stimulus plan signed into law this past Friday.  Losses slowed in US equity markets this week as well, with the S&P 500 declining by 3% (versus last week's 11% tumble). 

The full impact of the coronavirus' spread on the economy became increasingly clear this week, as 6.6 million people filed initial claims for unemployment insurance.  This staggering number came on the heels of last week's sizable 3.3 million claims, implying an unemployment rate well above 5% (vs. 3.5% at February month-end).  However, Friday's employment statistics release only showed a 4.4% rate as it was finalized before the full impact was felt by the labor market.

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