April 2, 2020 - Market Update

Mortgages rallied in the afternoon once the Fed completed their buying.  Overall more MBS was purchased on Wednesday ($27.5B vs.$19.5B), even though the Fed lowered their target earlier this week.   Originators welcomed the calm that this provided as they adapt to work at home operations.   Origination topped $5B yesterday, heavily concentrated in 2.5s. 

A rally for treasuries continued late Wednesday as investors looked for any asset with positive yields.  The 10-year rose 24/32^nds, pushing the yield down to 0.61%, while the 30-year bond rose 2-2/32^nds to yield 1.27%. 

Stocks were lower on Wednesday with most major averages falling 3-4% on rising US COVID-19 cases and falling global economic activity.  By comparison, US manufacturing activity fell but not as much as expected in March and the ADP private payrolls report reflected a loss of only -27k jobs, vs the -150k forecast.  The reality is both surveys were conducted before impacts of the virus took hold in the US.  Another interesting indicator is domestic auto sales which plunged over 30% in March. 

The US now has the most COVID-19 cases in the world.  China is under scrutiny as there is apparently a classified report floating around saying that China has been under-reporting their cases for months.  Not surprising given the lack of verifiable information from the country. 

The US braces for a peak in cases coming in the next week or two. But we’re keeping safe distances and hoping for the best.  Keep Calm and Hold On.