April 13, 2020 - Market Update

During last Thursday’s abbreviated trading session ahead of the holiday weekend, current coupon mortgages outperformed while higher coupons lagged as Fed operations focused in 2.5s and 3.0s continue to outstrip supply.  Originators were busy on Thursday covering positions and perhaps adding coverage ahead of the weekend.  Total origination flows were about $6.1B on the day which was far more robust than the $4.1B per day average seen over the past week.  On Thursday, there were a total of 4 different Agency MBS purchase operations conducted by the Fed.  They purchased a total of $18.1B in securities (10.2B FN / 7.9B GN) for April settlement.  At the 2pm early close, 30yr UMBS 2.5s in April were +7/32 (104-15) and 15yr UMBS 2.0s were +4/32 (103-10).

This morning, treasuries are trading higher across the curve ahead of the day’s activity.  Currently, the 2yr is +0.125/32 (0.229) and the 10yr is +1/32 (0.725). 

Today oil prices have pared earlier gains after the top oil producing nations all agreed to cut crude output, hopefully bringing an end to the recent price war.  It was agreed that production will be cut by 9.7M barrels/per day.  

While initial jobless claims for the week ending 4/3/20 hit a stunning 6.6 million persons, and raises to a colossal 16.8 million the number who have lost jobs in the last three weeks, the Fed is offering new lending facilities totaling $2.3 trillion to help households, state and local governments, and small and mid-sized business; places it’s never been!

The biggest cruise ship, the Symphony of the Seas (2018) with gross tonnage of 228,081 and a maximum capacity of 6,680 people. The next largest, the Harmony of the Seas (2016) with gross tonnage of 226,963 and with a capacity of 6,687. In third, Oasis of the Seas at 226,838 but with a record capacity of 6,780! The biggest supertanker built (now scrapped), the Bellamya at 275,276.