- Odds of Democratic control of Senate match recent high
- U.S. Covid death 7-day average reaches record high
- Brexit brinkmanship causes market jitters
- 3-year T-note auction to yield near 0.20%
Congress plans to pass 7-day CR to give more time for spending and pandemic aid bill — The House on Wednesday is expected to pass a 7-day continuing resolution (CR), thus extending the deadline for a U.S. government shutdown from this Friday (Dec 11) until next Friday (Dec 18). That would give Congress an extra week to try to pass a combined omnibus spending bill and pandemic aid bill.
There are many issues to address in both bills. In the proposed $908 billion pandemic aid bill, there is still disagreement on the amount of aid to state and local governments and on a pandemic liability shield, among other issues. That bill would extend unemployment benefits, contain another round of PPP aid to small businesses, and provide aid for a variety of other measures.
Presidential election results get closer to finality as today’s deadline arrives for states to certify election results and name electors — Today is the “safe-harbor” deadline for states to certify their results and name electors to the Electoral College. Those electors will then meet this coming Monday (Dec 14) to vote for president based on the election results in their respective states.
After the Electoral College vote, it would be virtually impossible for President Trump to reverse the outcome of the election. Congress is scheduled to certify the outcome of the election on January 6, just after the new Congress is sworn into office. Inauguration Day is January 20.
Odds of Democratic control of Senate match recent high — Control of the Senate still hangs in the balance ahead of the January 5 run-off elections in Georgia for both of its Senate seats. The Democrats must win both of those seats to take control of the Senate.
The betting odds at PredictIt.org, for whatever they are worth, have improved to 34% for Democrats to take control of the Senate, matching last week’s post-election record high. The odds for the Democrats improved after incumbent Republican Senator Perdue refused to show up at a debate on Sunday and his Democratic challenger, Jon Ossoff, debated an empty lectern and had full rein to bash Mr. Perdue for his stock trading and other issues.
While the betting odds suggest that the Republicans will retain control of the Senate, the markets must still take into consideration that there is a decent 34% chance that Democrats could take full control of Washington and pass their blue-wave agenda with tax hikes and a big fiscal stimulus program.
U.S. Covid death 7-day average reaches record high — Covid deaths are on the rise in the wake of the Thanksgiving holiday. The 7-day average of daily U.S. Covid deaths reached a new record high of 2,203 deaths on Sunday, edging above the previous high posted in April, according to data compiled by Bloomberg. The medical community has become much better at treating Covid, but deaths are nevertheless rising because of the sheer volume of new patients.
Indeed, the 7-day average of new U.S. Covid cases reached a record high on Sunday of 196,319, according to data compiled by Bloomberg. The number of daily Covid cases spiked up to a record high of 228,419 last Friday, helping to push the 7-day average higher.
The only good news is that U.S. vaccinations are expected to begin on a limited basis as soon as this Friday. On Thursday, an FDA panel is expected to approve an emergency authorization for the Pfizer/BioNtech Covid vaccine, allowing vaccinations to begin on Friday. However, vaccinations are not expected to put a dent in the pandemic surge until spring when they become widely available to the general population.
Brexit brinkmanship causes market jitters — The markets on Monday became nervous about a no-deal Brexit when negotiators reached an impasse, which sent GBP/USD to a -0.45% sell-off on the day. Prime Minister Boris Johnson is now heading to Brussels to meet in person with European Commission President Ursula von der Leyen. The two sides remain stuck on the usual three issues of fishing, a level playing field, and enforcement.
It remains to be seen whether the two sides are simply engaged in last-minute brinkmanship, or whether the talks are actually in serious trouble. It seems hard to believe that the two sides would come this close to a deal and instead opt for a chaotic no-deal Brexit on January 1. Mr. Johnson is already walking a political tight rope at home and cannot afford to add Brexit chaos to the pandemic shutdowns.
The EU is trying to force a deal before the EU Summit on Thursday and Friday so that leaders at their summit can approve a deal and pass it along to the European Parliament for approval. However, the UK-EU may blow through the summit deadline with the idea that there is still some time left to squeeze out some additional concessions before December 31.
3-year T-note auction to yield near 0.20% — The Treasury today will sell $56 billion of 3-year T-notes. The benchmark 3-year T-note yield yesterday closed -1.3 bp at a 1-week low of 0.197%. The 12-auction averages for the 3-year are as follows: 3.43 bid cover ratio, $32 million in non-competitive bids, 3.3 bp tail to the median yield, 16.0 bp tail to the low yield, and 64% taken at the high yield. The 3-year is tied with the 2-year as the least popular security among foreign investors and central banks. Indirect bidders, a proxy for foreign buyers, have taken an average of only 51.0% of the last twelve 3-year T-note auctions, which is far below the median of 63.1% for all recent Treasury coupon auctions.
