This Weekly Market Update reviews the top three market headlines: U.S. Treasury Resurrects 20-Year Bonds, Corporate Bankruptcies and Debt Default Surge, All 50 States Ease Coronavirus Restrictions

Data Points

  • The U.S. government sold $20 billion of 20-year Treasury bonds at a yield of 1.22%
  • Chapter 11 bankruptcy filings increased by 18% in March from the prior year
  • All 50 states have moved to ease COVID-19 restrictions to some degree

Top Three Market Headlines

U.S. Treasury Resurrects 20-Year Bonds: For the first time in 34 years, the U.S. government last week issued Treasury bonds with a 20-year maturity. The offering was met with strong demand from investors, who placed $50 billion in orders for the $20 billion of bonds issued. With government stimulus spending surging in response to the COVID-19 pandemic, U.S. Treasury officials estimate borrowing a record of nearly $3 trillion in Q2. The Treasury Department views the issuance of 20-year bonds as a means to help meet its funding needs at an attractive interest rate—the bond was issued at a 1.22% yield—while lengthening the average maturity of its debt.

Corporate Bankruptcies and Debt Defaults Surge: Reflecting the economic effects of COVID-19 containment measures on corporate America, a growing number of companies are struggling to pay creditors. Chapter 11 bankruptcy filings spiked by 18% in March versus the prior year, while April marked the highest single month for debt defaults since the Global Financial Crisis. Companies in the retail and restaurant, media and entertainment, and health care industries reported the majority of defaults, as demand has collapsed amid restrictions that prevented in-store consumption of goods and services. S&P Global predicts that defaults will continue to rise, and sees the default rate in the high yield bond market potentially reaching 10%.

All 50 States Ease Coronavirus Restrictions: After enduring two months of COVID-19 containment measures, including the shutdown of a broad range of business activities, all 50 U.S. states have now taken at least partial steps to reopen their economies. Rules vary across states, most of which are reopening in phases, with additional loosening steps dependent on progress in slowing the contagion. The easing of restrictions comes as state and local government officials weigh the economic aftermath of the shutdowns, including municipal budget shortfalls and unemployment claims that have totaled nearly 40 million over the last nine weeks.

As of May 22, 2020 Week Quarter-To-Date Year-To-Date One-Year
MSCI All Country World 2.89% 11.52% -12.31% -0.94%
S&P 500 3.27% 14.71% -7.77% 5.58%
Russell 2000 7.87% 17.76% -18.29% -10.15%
MSCI EAFE 3.01% 5.70% -18.43% -9.43%
MSCI Emerging Markets 0.48% 6.94% -18.29% -6.89%
FTSE NAREIT 7.35% 3.82% -24.53% -19.40%
Bloomberg Commodity 1.76% 1.45% -22.19% -19.34%
Barclays U.S. Aggregate 0.35% 2.02% 5.23% 10.49%

WSJ 5/20/20, CNBC 5/20/20, Yahoo 5/19/20. Data from Morningstar Direct. Returns for periods greater than one year are annualized. Investment advisory, named and independent fiduciary services are offered through Gallagher Fiduciary Advisors, LLC, an SEC Registered Investment Adviser. Gallagher Fiduciary Advisors, LLC does not express an investment opinion regarding any specific commodity, sector or individual security. Unless otherwise expressly noted, the contents of this communication do not constitute securities or investment advice, nor should this communication be construed as an opinion regarding the appropriateness of any investment. Gallagher Fiduciary Advisors, LLC is a single-member, limited-liability company, with Gallagher Benefit Services, Inc. as its single member. Neither Arthur J. Gallagher & Co., Gallagher Fiduciary Advisors, LLC nor their affiliates provide accounting, legal or tax advice. The information provided cannot take into account all the various factors that may affect your particular situation, therefore you should consult your Gallagher Fiduciary Advisors consultant before acting upon any information or recommendation contained herein to discuss the suitability of the information/recommendation for your specific situation.