Good Tuesday AM,

Dan Rawitch had some good insight this a.m. albeit more directed to the advanced industry professionals (the kernel is the last sentence, which if it comes to pass, will allow rates to drop a bit).

Treasuries are very strong again this morning while MBS is on the weaker side. The divergence is likely caused by default concerns causing investors to demand a higher yield on MBS than on treasuries. This is not a concern to me at this point because the Fed owns this entire market and will continue to do so until we are out of the woods. Huge headlines in the Wall Street Journal this morning which reinforces what you have been hearing me say. The headline reads that the agencies may soon decide to purchase loans in forbearance.

If you were asking me, ‘Hey Brad, what are you concerned about?’, it would not be mortgage rates. Rates are going to remain low though the foreseeable future. There is really no where for them to go for several reasons. The Fed owns the space, the economy needs support, our Treasury notes are the best safe haven in the world, to name a few. I am, though, getting concerned about the recovery. Oil prices were negative for the first time in history yesterday and are negative today. That would mean that if you can take delivery of oil, the producers will pay you to buy it. WHAT???? What do you think that means for the economy? I see it as a huge red flag for any growth: travel (planes, cars, and ships used refined oil), construction, mining, farming, etc. Demand is currently so weak (and expected to be weak) that there is more oil being produced than will be consumed, and there is no storage left to put it. This is problematic, and along with delayed openings of hotels, hospitality, restaurants, shows, sports, etc., in my mind, speaks to what we can expect from the recovery. With that, equities are getting beat up (and I expect more blood) with the Dow down 600. The 10-yr treasury is at .55% and mortgage bonds are flat. I hope I am wrong and will gladly admit it.

Some good news for housing though, During a time when we are told to stay home for our own good, there are still home shoppers out there. But how are they shopping? According to a survey from Realtor.com, about 25% of shoppers say they would buy a home without even stepping foot in it.

The pandemic is changing the way we all live, work, and play. As the country reopens, we will certainly ease up a bit and move back into some of our old ways however, I think much of the change will be with us for quite some time.
Be safe and healthy; make today great.