June 8, 2020 - Market Update

US treasuries were lower in price and higher in yield on Friday, with the 10-year benchmark closing at the highest yield since the March 19th level of 1.144% yield, at 0.896%. The upcoming announced record issuance of the 10-year and 30-year treasuries have weighed on treasury yields. Mortgage origination volume came in at a robust $7.72B to close out the week, close to the five-day average of $7.75B.

Federal Reserve MBs purchase operations scheduled for today – 30-year Ginnie Mae 2.5% and 3%, totaling $1.5B, and 30-year Uniform MBS 2.0-3.0%, totaling $2.97B.  The faster than expected prepayments this month put on hold the idea of the Fed tapering purchases in the near term.

The surprise increase in payroll numbers dominated the headlines on Friday, sparking a broad-based rally in equity markets, while treasuries declined in price to their highest levels in yield since pre-crisis. Undercutting some of the good news was the Bureau of Labor Statistics’ own statement that some unemployed workers were categorized as “absent from work for other reasons,” artificially lowering the unemployment rate by an estimated 3%. 

Regardless of any qualifiers, the news was definitely welcome by US equities, with the Dow Jones Industrial Average Index closing up +829.16 points (up 3.15%) at 27110.98, the S&P 500 Index up +81.58 points (+2.62%) at 3193.93, and the NASDAQ Composite Index up +198.27 point (2.06%) at 9814.08.  On the year, the S&P 500 has rallied from the COVID-19 crisis lows to almost flat on the year, while the NASDAQ is now up close to 10%.