The strong optimism of investors in the current environment, the unknown future of recovery, and getting the economy back to what was normal is incredible. Stock indexes continue to advance, 22 million on unemployment, most of the country under social distancing, most small businesses closed (and many won’t ever reopen). The obvious huge rebound in the equity markets is encouraging. Investors are looking for a vaccine soon, opening the country (although slowly), increased testing that will mitigate the virus spread, the extremely positive response from the Fed and Treasury to assist people, forbearance of mortgage payments, financing the airlines and Wall Street.
What hangs out there, though, is how strong and rapidly will the economy bounce back? The strong rebound in equity markets suggests investors currently believe that by Q3 and through the end of this year, we’ll recover a large part of the unemployment, and businesses will be back on firm financial foundations. Maybe the most encouraging factor driving the optimism is the belief a vaccine will be available sooner than what has been thought. A vaccine trial by the University of Oxford researchers aims to get efficacy results by September, and manufacturing is already underway. Equity markets laying large bets those assumptions. Hopefully, the market will eventually be right; the DJIA is still about 6K points from its high, so far we see the improvements as a normal reaction to the panic selling that dropped the DJIA and the other indexes down over 35%.
The turmoil in the MBS markets has settled down after a month of chaos. From the beginning of March through the end of March, the industry was reeling over the lack of liquidly with non-bank origination buyers and the rapid decline in the value of loan servicing agreements. Now, as you can see graphically looking at the charts, the markets appear to be stabilizing, although there are still lenders withdrawing from competition in daily pricing.
A vaccine trial by the University of Oxford researchers, led by Sarah Gilbert, a professor of vaccinology, has recruited 500 volunteers from the ages of 18 to 55 for the early- and mid-stage randomized controlled trial. It will be extended to older adults and then to a final stage trial of 5,000 people. Gilbert said that the timing is ambitious but achievable. “We would hope to have at least some doses that are ready to be used by September,” she said in an interview. “There won’t be enough for everywhere by then, but the more manufacturing we can do starting from now, then the more doses there will be.” The group’s experimental immunization is among the first to enter clinical trials.
At 9:30 am ET, the DJIA opened +537, NASDAQ +107, S&P +53. 10 yr at 9:30 am ET 0.62% +1 bp. FNMA 3.0 coupon at 9:30 am ET -2 bps from yesterday’s close and -6 bps from 9:30 yesterday.
Cleveland Federal Reserve Bank President Loretta Mester said the central bank is working to support market functioning, but added any efforts to reopen the economy should be handled in stages. Mester went on to say that social distancing and protective equipment, including masks and gloves, will likely be needed. “No one wants to go backward,” Mester said during an interview with Bloomberg TV. “Everyone wants to kind of get back to work, but everyone realizes that how you do that really has to be done very carefully.”
Are you an older citizen and want to buy life insurance, or increase your coverage? Not going to be easy under the current fears that older people are likely to die from the virus. U.S. life insurers are deciding not to gamble on older Americans during the coronavirus crisis by temporarily suspending applications from certain age groups or imposing tougher requirements. Prudential Financial, Lincoln National, and Protective Insurance are among the insurers that have made changes. Prudential and Protective are temporarily halting applications from individuals aged 80 or older, while Lincoln has postponed approving policies for that age group and others, the companies said. Even in regular times, anyone 80 or older would pay substantial premiums.
At 10:00 am ET, the only data today, March leading economic indicators, expected -7.0%, as released -6.7%. The index began in 1959; the index has never fallen to this low of a level.
Source: TBWS
