July 27, 2020 - Market Update
Stocks – Stocks opened mixed as investors continue to review earnings reports and monitor developments on the anticipated U.S. stimulus package. Republicans are set to release their proposal for the next coronavirus relief bill and start negotiations with Democrats as the expiration of jobless benefits is scheduled for the end of the month. Gold rallied to a new record, indicating uncertainty on economic outlook due to the pandemic and the U.S. dollar dropped to it lowest level in nearly two years with investors expecting the Federal Reserve to continue its dovish approach.
Treasury – Bond pricing opened weaker and treasury yields dipped slightly this morning over mounting global economic concerns. The 10-year U.S. Treasury is currently yielding 0.577%. Orders for durable goods increased 7.3% in June, slightly above the 7% expected increase. Orders for new cars and trucks increased 86% last month as automakers made up lost ground from being shut down. The overall value of orders in U.S. Dollars remains below pre-pandemic levels. Many are concerned that the momentum seen in May and June could taper as coronavirus continue to surge, but the gains will unlikely be erased unless additional shut down orders come into place.
MBS – Lower Fannie 30 Year coupons saw a flat day relative to 10 Year Treasury performance on Friday. Fannie 3 coupons and higher closed down 2-3 ticks. Ginnie coupons had a mixed performance as 2s outperformed the 10 Year by 2 ticks and higher coupons underperformed by 2-4 ticks. Fannie 15 Year coupons also closed 1-4 ticks lower than the 5 Year Treasury benchmark. Trading activity picked up to $210 billion, including $20 billion in Specified Pool trades.
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