July 21, 2020 - Market Update

Stocks – Stocks opened higher following gains in American tech stocks as investors continue to digest earnings reports from major companies this week. After four days, leaders of the European Union agreed to a historic $750 billion recovery plan. The package is built around the bloc’s first ever issuance of hundreds of billions of euros of common debt with nearly $450 billion in the form of grants. Silver pricing is up 8.2% this week and gold prices rose by 1.4% to its highest level since 2011 as investors view buying the metal as a haven asset and to hedge against potential inflation and uncertainty in the economy.

Treasury – pricing and treasury yields remain steady this morning ahead of a busy mid-week flurry of economic release. The 10-year U.S. Treasury is currently yielding 0.612%. The Chicago Fed National Activity Index was released this morning showing a better than expected +4.11 in June, which was up from +3.50 in May. The index is designed to gauge overall economic activity and related inflationary pressure. The market appears to have shrugged off the positive results this morning with upcoming MBA mortgage applications and Existing Home Sales being released tomorrow then Initial Jobless Claims and Continuing Claims on Thursday.

MBS – Fannie coupons closely followed the performance of the 10 Year Treasury Benchmark yesterday. The 3 coupon saw highest divergence with a 3 tick lag behind the 10 Year. Ginnie coupons were also beaten out by the Treasury by 1-3 ticks. The Ginnie 2.5 was the only coupon to post a 3 tick gain over its benchmark. Fannie 15 Year coupons followed the 10 Year as well, with the lower coupons posting very slight gains by the close of the day. Trading activity tapered off with $184 billion exchanging yesterday, including $17 billion in Specified Pool trades.