July 28, 2020 - Market Update

Stocks – Stocks opened lower as investors assess corporate earnings and focus on the progress of the next stimulus bill. Republicans will need to secure the backing of Democrats to move forward with their current proposal to cut the federal weekly unemployment supplement from $600 to $200 through September, at which point the payment would combine with state benefits. The U.S. reported a rise of 55,000 coronavirus cases on Monday, the slowest daily pace since July 7. Investors will turn their attention to the Wednesday conclusion of the Federal Reserve’s two-day policy meeting to determine its next rate decision and monetary outlook.

Treasury – Bond prices improved and treasury yields increased this morning as the FOMC begins their two-day policy meeting. The 10-year U.S. Treasury is currently yielding 0.590%. The Fed has extended emergency lending programs until December 31 to ensure participants will be able to help the economy recover from the Covid-19 pandemic. Consumer confidence fell to 92.6 in July as additional coronavirus cases increased concerns and altered sentiment about the economy’s prospects.

MBS – Fannie 30 Year MBS had a strong day relative to the 10 Year Treasury. Across the board, Fannie coupons outperformed the Treasury by 2-4 ticks. Ginnie 2.5s had the best performance of the Ginnie coupons with 4 tick improvement, while the rest of the Ginnie coupons only saw a 2 tick improvement. Fannie 15 Year coupons mostly tracked the 5 Year Treasury with lower coupons closing a little lower. Trading saw a similar pattern of activity with $210 billion exchanging parties, including $20 billion in Specified Pools.