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EU leaders agreed to a historic deal on a €750 recovery fund following five days of lengthy discussions. The stimulus package will be comprised of €390 billion in grants and €360 billion in low-interest loans. The agreement came the same week that the eurozone experienced its fastest rate of business activity growth in more than two years, according to the IHS Markit survey, and the Flash PMI index for the region rose to 54.8 – well above the 50 level that marks expansion versus contraction

• - Equities generally ended the week lower as investors continue to rotate from growth to value-oriented stocks. Sentiment was challenged throughout the week as investors grew increasingly concerned about U.S. economic recovery – with billions of dollars of federal aid set to expire at month end – at the same time that U.S. virus cases passed a record 4 million. Interest rates generally fell, though credit spreads were broadly tighter on the week
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  - U.S. economic data were mixed as existing home sales jumped to a record pace and new home sales hit a 13-year high, but weekly jobless claims – often viewed as a leading indicator for economic activity – increased for the first time since March with 1.41 million new filings

What happened? Global risk assets ended the week generally lower as U.S. virus cases hit a record 4 million, filings for U.S. weekly unemployment claims rose for the first time since March, and U.S.-China tensions increased following tit-for-tat consulate closings. Reflecting declining risk sentiment, gold hit a record high and the 5-Year U.S. Treasury yield reached a new low of 0.25%. In Europe, the European Union settled on a significant €750 recovery fund that will be complemented by a €1.074 trillion budget – allowing the EU to, for the first time ever, run a federal deficit in responding to an economic downturn. Meanwhile, Congress appeared to make progress toward a new stimulus bill

• - Equities across the developed world finished mixed; European equities posted positive returns on news that Eurozone flash PMIs rose to expansion territory for the first time since February. US equities finished lower as investors grew increasingly concerned about U.S. economic recovery just as billions of dollars of federal aid is set to expire. Value meaningfully outperformed growth in the U.S. for the second week in a row
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  - Rates broadly fell across most developed markets. In the U.S., the yield curve flattened as the 30yr yield fell nearly 10bps. Rates also fell in the U.K. and Germany, while European peripheral spreads tightened following the agreement to establish the EU recovery fund
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  - Credit spreads rallied further, with U.S. IG tightening another 6 bps amid accelerating demand: $11bn inflows into IG credit and $4.3bn into HY for the week ended July 22. Supply remained light, with only $8.5bn of IG issuance this past week, bringing July MTD total to $40bn. The Fed’s corporate bond buying continued to slow, dropping to approximately $125mm purchases a day, with total purchases at $12.1bn. 2Q earnings have shown bifurcation between companies, as some segments of the market have been hit harder by COVID and the global shutdown
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  - Agency MBS spreads widened marginally, but broad based demand across the coupon stack from overseas investors, US hedge funds, banks, and money managers coupled with support from the Fed remained positive for valuations. Overall, the sector continues to benefit from extraordinary central bank support
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  - Emerging Markets were up with all parts of the asset class –external and local as well as HY and IG countries – generally performing well. A notable outperformer in external debt was Argentina due to a new restructuring proposal from the three largest bondholder groups, raising market hopes of an end to the months-long restructuring process
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  - Muni yields rallied 2-5bps across the curve on persistent fund inflows – Lipper reported $2.1bn– and elevated levels of reinvestment capital. This marked the 10th consecutive week of inflows into muni bond funds, pushing net flows positive year-to-date for the first time since March. The strong demand has kept net supply negative, providing a tailwind for performance
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  - Oil prices (Brent crude) edged modestly higher, closing at $43.34/barrel. Prices began last week stronger and reached their highest level since early March as optimism surrounding a coronavirus vaccine offset demand concerns linked to the continued rise in global infections. Signs of crude production returning amid higher prices, however, drove oil lower after estimates from DOE data indicated a sharp increase in U.S. output
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  - Breakeven inflation rates in the U.S. rose as the 10yr closed at 1.50% despite mixed energy market moves