July 9, 2020 - Market Update

Stocks – Stocks opened mixed as new labor market data showed a larger than expected drop in initial jobless claims. A reported 1.31 million Americans filed for unemployment benefits last week, showing that weekly claims have decreased since April but have been holding steady around 1.5 million for weeks. China’s market is up for the eighth straight day leading Asian indexes higher during its longest winning streak since January 2018. The U.S. reported more than 58,000 new cases on Wednesday, a slight decline from the single day record the previous day. Investors continue to largely look past rising Coronavirus cases and new shutdowns and instead are focusing on fiscal and monetary support from central banks and governments to lead to recovery and contain economic damage.

Treasury – Bond prices opened sharply higher this morning. The 10-Year Treasury is yielding 0.62%. Applications for unemployment benefits in the U.S. declined last week more than projected, easing concerns of a renewed downturn in the labor market after several large states reported a pickup in Coronavirus cases. Initial jobless claims came in at 1.31 million in the week ending July 4. A recent easing in layoffs is a welcome respite for the U.S. labor market, but the threat of future job cuts looms large as companies deal with depressed demand and dwindling government support. Well Fargo is preparing to cut thousands of jobs starting later this year and could ultimately eliminate tens of thousands of positions. United airlines also said they will cut several thousands of jobs.

MBS – MBS had a strong session on Wednesday, as volumes remained elevated ahead of Friday’s Class A notification.  30-year Fannies and Ginnies outperformed their 10-year hedge ratios by 1-4 ticks, with the 2.5% coupons putting in the best performance, outpacing 10s by 4/32s.  15-year Fannies mostly outperformed the 5-year by a tick, although 3.5s continued their fairly erratic recent performance.  FINRA reported total volumes of over $440 billion, including $36.7 billion in specified pools.

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