April 16, 2020 - Market Update

Yesterday’s total origination flows were about $6.7B which is right on top of 5-day moving average.  For the day the Fed purchased $13.0B of MBS ($9.6B FN / $3.4B GN).  This morning, treasuries are trading mixed ahead of the day’s activity.  Currently, the 2yr is -0.5/32 (0.209) and the 10yr is +6.5/32 (0.614). 

Today, congressional leaders will continue the debate over the need for more stimulus measures as the almost $350B allocated for small business loans is set to run out of money. 

In 20Q1, GDP probably declined at an annual rate of 5%. In 20Q2, the decline will be an ugly 24%. In 20Q3 GDP grows by 2% and in 20Q4 by a strong 7%. In total, GDP will contract by 5% in 2020. While some see a V-shaped recovery, a U-shaped or a checkmark-shaped recovery is more likely given policy implementation problems, ongoing struggles battling Covid-19 and the inevitable delays reconstituting businesses.

In terms of economic releases, this morning’s release of the weekly jobless claim data will be one of the major focuses of the day as the crisis continues to wreak havoc on the labor markets.  Based on current consensus estimates, initial claims are expected to have risen by 5.5 million last week.  This reading would be lower than the 6.6 million claims added the previous week but would bring total claims filed over the past month to over a staggering 22 million.  This figure would practically equate to the number of new jobs added to the economy over the past 10 years.  Additionally, reports on housing starts and building permits for March will be published.