July 22, 2020 - Market Update

Stocks – Stocks edged higher as tensions escalate between the U.S. and China and investors weigh the probability of Congress agreeing on a new stimulus bill before their summer break. China’s Foreign Ministry said the U.S. instructed China to close its consulate in Houston, prompting Beijing to condemn the move as outrageous and unprecedented. In a statement, the State Department accused China of extensive interference in domestic affairs and intellectual property theft. The closure order first made public by Beijing, coincided with Washington announcing indictments against two hackers in China accused of targeting American firms involved in Coronavirus research.

Treasury – Bond Prices are mixed and treasury yields have decreased this morning as parties seem divided over additional Coronavirus aid. The 10-year U.S. Treasury is currently yielding 0.585%. With rates near all-time lows, refinance volume is up another 5.3% last week according to the Mortgage Bankers Association and now hovering at a three-month high in terms of application volume. The FHFA House Price Index was released this morning and shows a 0.3% decrease in home prices for May versus an expected increase of 0.3%. Year over year, prices are 4.9% higher than May of 2019. Due to COVID shutdowns, volume was down roughly 30% year over year.

MBS – Mortgage-backed Securities had a solid outing yesterday. Fannie coupons were not an exception with a positive performance ranging from 1-3 ticks improvement relative to the 10 Year Treasury Benchmark. Lower Ginnie coupons also performed well with a 5 tick improvement on the 2’s and 2 ticks on the 2.5’s. Ginnie 3’s faired a little worse with 3 tick lag to the Treasury, and higher Ginnie coupons tracked the benchmark for the most part. Fannie 15’s, like Fannie 30’s, saw performance range 1-3 ticks better than their benchmark. Trading activity increased relative to the day before with $282 billion exchanging, including $19 billion in Specified Pools.