March 31, 2020 - Market Update

Mortgages opened the day significantly outperforming treasuries as the Fed-fueled rally sent MBS higher and tighter.   The Fed has purchased over $250B in MBS, hitting a high over $40B last Friday.  Since Friday, the Fed has been lowering its daily purchases from a maximum of $50B to $30B and on Monday purchased half the intended target. 

The lower purchases combined with nearly $6B in origination finally sent MBS prices lower after 3:00 PM marks yesterday.  Originators were already operating at or near capacity, so the rapid run-up in MBS prices was doing little to lower borrowing rates.   April’s pool lists will be available later this week and we’ll take inventory then.

Treasuries rally on Monday as governors expanded their stay at home orders and investors were speculating about the next round of government-backed stimulus.   By the end of the session, the 10-year had rallied 11/32^nds to yield 0.70% and the 30-year bond was up 8/32^nds pushing the yield down to 1.32%. 

The DOW added 690 points on Monday as investors hope that central banks continue to pour money into the system and offset the impacts of COVID-19.  Gains continue to be led by healthcare stocks with Johnson & Johnson rising 7.8% and Abbott Labs up 6.9%.  Commodities ended mixed with oil hitting its lowest level since the 1990s on rapidly falling demand with much of the world on lockdown. 

The US has the largest number of confirmed cases, with New York at the epicenter.  Economists predict double-digit negative growth and unemployment spiking into the mid-teens, levels few of us have ever contemplated. 

Between hospitality & leisure, store-based retail, and other sectors that face forced limitations, about 36% of the US economy is being impacted in the effort to curb the spread of COVID-19. If the restrictions reduce activity in these sectors by two-thirds, GDP will decline by a whopping 24%.  It is thought that GDP may be falling at a rate of 6% per month.