IMF policy panel endorses $650 billion increase in resources
WASHINGTON — The International Monetary Fund on Thursday authorized a $650 billion expansion of the 190-nation lending institution’s resources with the aim of providing more support for vulnerable countries as they battle the coronavirus pandemic.
IMF Managing Director Kristalina Georgieva said the $650 billion increase in reserves is the largest in IMF history. The move will provide badly needed reserves for poor countries struggling with deep recessions caused by the pandemic and the need to obtain and administer millions of doses of vaccines, she said.
By comparison, to combat the global recession that followed the 2008 financial crisis, the IMF agreed to an increase of $250 billion in the IMF’s reserves of what are known at the agency as Special Drawing Rights.
U.S. Treasury Secretary Janet Yellen told the IMF panel that the SDR increase would provide a “much-needed boost to global reserves.” She said it would be important for rich countries who do not need the increase in resources to supply that extra support to poorer nations.
The idea of increasing IMF reserves gained support when the Biden administration endorsed the plan in February, marking a reversal from the Trump administration which had opposed the effort.
Republican lawmakers in Congress have raised objections to the increase in IMF resources, saying the increase would benefit countries seen as U.S. adversaries such as China, Russia and Iran.
The Treasury said that the United States retained the right to refuse to engage in any SDR transactions with “any country whose policies run counter to U.S. interests.”
Officials have indicated that the first distribution of the increased reserves could begin in August after a detailed plan is submitted for approval by the IMF’s board of directors in June.
The communique from the IMF’s policy panel, made up of finance ministers representing the agency’s membership, also endorsed efforts to mitigate the impact of climate change on the global economy. That represented another change from the Trump administration, which pulled the United States out of the Paris climate agreement, an action the Biden administration has reversed.
“In line with the Paris agreement, we commit strongly to addressing climate change through measures to accelerate the transitions to greener societies and job-rich economies while protecting those adversely affected,” the IMF communique said.
Stocks rise as lower bond yields help lift tech companiesTechnology companies led stocks to more gains on Wall Street Thursday, nudging the S&P 500 to an all-time high for the third time this week.
The benchmark index rose 0.4% and is on track for its third straight weekly gain. Stocks within the S&P 500 were about evenly split between gainers and losers, with technology companies driving much of the rally. Those gains were tempered mainly by a slide in energy stocks and real estate companies.
Bond yields, which had been steadily ticking higher, continued to inch back from the highs they hit earlier in the month. The yield on the 10-year U.S. Treasury note, which influences interest rates on mortgages and other loans, fell to 1.63% from 1.65% Wednesday. It had been as high as 1.75% on Monday.
That pullback in yields took some pressure off technology stocks, which have slipped over the last few months as yields jumped and made the shares look pricey. The sector has also seen choppy trading as investors shift more money into companies that stand to benefit from the economic recovery.
“We expect rates to rise because the economy is looking better,” said Sylvia Jablonski, chief investment officer at Defiance ETFs. “I don’t think that the 10-year (Treasury yield) moving around in the short term is really an issue for the market.”
The S&P 500 rose 17.22 points to 4,097.17. The index also set record highs on Monday and Wednesday. The Dow Jones Industrial Average gained 57.31 points, or 0.2%, to 33,503.57. The tech-heavy Nasdaq composite climbed 140.47 points, or 1%, to 13,829.31.
Small company stocks, which have been outpacing the broader market this year, also had a good showing. The Russell 2000 index of smaller companies picked up 19.54 points, or 0.9%, to 2,242.60. The index is up 13.6% so far this year, while the S&P 500, which tracks large companies, is up 9.1%.
Big Tech stocks were among the biggest beneficiaries as bond yields cooled off. Apple rose 1.9%, Microsoft gained 1.3% and Amazon added 0.6%.
Mortgage rates dip to 3.13%
MCLEAN, Va. — Mortgage rates fell for the first time in more than two months as buyers continue to be stifled by high prices and limited supply.
Mortgage buyer Freddie Mac reported Thursday that the benchmark 30-year loan rate dipped to 3.13% this week from 3.18% last week. At this time last year, the long-term rate was 3.33%.
The rate for a 15-year loan, popular among those looking to refinance, fell to 2.42% from 2.45% last week. One year ago it was 2.77%.Mortgage rates have been historically low for years, but strong demand and low inventory have pushed prices higher.
Last week the National Association of Realtors reported that its index of pending home sales tumbled 10.6% to 110.3 in February, its lowest level since May of 2020. Contract signings are now slightly behind where they were last year after eight straight months of year-over-year gains.
Meanwhile, U.S. home prices rose at the fastest pace in seven years in January, according to the S&P CoreLogic Case-Shiller 20-city home price index. The pandemic has fueled demand for single-family homes as people look for more space.
Economists expect home loan rates to remain low as the Federal Reserve says it intends to keep its main borrowing rate near zero until the economy recovers from the coronavirus pandemic.