Good Friday AM,

Stocks doing better today and Bonds are flat. The 10-yr is sitting at .66% right in the middle of the .58-.74% range and mortgage bonds which have been outperforming for the past few days are doing so again today.  On the news front Durable Orders missed expectations and was down significantly from last month. This suggest that the big recovery from the COVID shutdown has now run its course. This is bullish for bonds.

Speaking a bit more technically on mortgage bonds from Matt Graham, MBS prices generally saw lower lows and lower highs in those 2 weeks whereas Treasury YIELDS did the same thing (meaning they were IMPROVING modestly while MBS were losing ground).  As of today, however, the curse has been reversed.   Steady gains in MBS have each 3-month chart looking much more similar to one another. It may come as even better consolation that the recent underperformance in MBS is entirely explainable.  You know that adverse market fee business (Fannie Mae fee of 50bps on all refinances)?  You know how it has motivated additional lock demand?  Add that together with rates that are still low enough to keep lender pipelines full and there’s quite simply been a surge in MBS supply in recent weeks.  At the same time, delays and downgrades of the next fiscal stimulus bill mean less issuance pressure on Treasuries (because Treasuries help pay for stimulus, and more Treasuries = higher supply, lower prices, higher yields, all other things being equal).

In a sobering survey of 1,500 adults conducted on Sept. 9, as a result of Covid, 46% of homeowners said they missed three or more payments since March, while 46% still owe at least $2,000—including 18% who have at least $5,000 in deferred payments. Renters were more likely to miss or defer rent payments (33%), but homeowners generally owed more on the payments they failed to make. The study also found 55% of homeowner respondents were living paycheck-to-paycheck and 15% did not currently have stable income.

Please remain safe and healthy, enjoy the weekend and first, make today great!