Mortgage Market Update – June 15th, 2020
Previous Week Recap
A steeper trajectory for the coronavirus curve interrupted the groundswell of positive sentiment last week that had been precipitated by consistently better than expected economic data. Both the Dow and S&P enjoyed a brief return to positive territory for the year before selling pressure mounted, hitting those names particularly at risk to coronavirus impact the most. Friday brought a volatile session for equities, and while managing to close the day higher key indices were still down around 5% for the week. Treasuries were mixed, with yields at the longer end of the curve closing higher by 3 to 5 basis points. Mortgage supply out of originators had mortgage-backed securities (MBS) underperforming their Treasury counterparts for much of the day and current coupons ended the session 6 to 10 basis points worse in price.
The jitters from last week do not seem to have dissipated, as equity futures are pointing to substantive losses at the open. Fed Chairman Jay Powell will be testifying before Congress later this week and his bleak economic outlook revealed at the most recent FOMC meeting remains fresh on the minds of market participants. Also of note this week, Retail Sales is scheduled for release tomorrow and investors hope it will be reflective of increasing consumer confidence. More than anything, however, the incoming news about COVID infection rates will drive price action. After experiencing several weeks of relative calm, we may be entering a zone of heightened volatility—at least for equities. Treasuries are back within the confines of the previous trading range and should find some comfort there.
Have a great week everyone!
Head of Capital Markets, Southern Trust Mortgage