Morning Report: Markets rebound

Vital Statistics:


Last Change
S&P futures 2828 81.25
Oil (WTI) 33.56 2.49
10 year government bond yield 0.62%
30 year fixed rate mortgage 3.22%


Stocks are higher this morning after yesterday’s violent sell-off. Bonds and MBS are down.


Despite the huge drop in bond yields yesterday, mortgage rates only improved by 4 basis points. It seems like the main buyers in the TBA market are originators adjusting their hedge positions. Pipelines are full, and most people are building in more margin on their rate sheets. I can’t imagine sub 2% yields for a security with pretty heavy interest rate risk is going to entice many bond funds.


If you called Bank of America to get a refinance yesterday, there was a two-hour wait to speak with a loan officer. Lenders are inundated with business right now. “Demand has ramped up in a way that many lenders have never experienced,” said Matthew Graham, chief operating officer at Mortgage News Daily, which tracks rates every morning. “Some of them have taken to raising rates in order to deter new business.  Others have completely stopped accepting new applications.” Once rates stabilize and the margin calls / fallout fears recede, the industry is going to feast. 2020 will probably break records.


The VIX (which is the CBOE volatility index, a measure of fear in the market) spiked over 60 yesterday, which is the highest since the financial crisis. Anyone remember what the spike in February 2018 was all about? The market had the worst 1 day point decline in history up until that point. How about the one in August 2015? The Dow lost 1,000 points and the S&P lost 120 in one day. If you search the news stories, the sell-offs are attributed to some bad economic number out of China, or something else transitory. Who knows, in two years we might look back at this sell off and scratch our heads wondering what was going on.




Small business remained optimistic in February, according to the NFIB. The survey pre-dates the market freakout and Fed cut, so maybe it is too early to see an impact from Coronavirus. “The small business economic expansion continued its historic run in February, as owners remained focused on growing their businesses in this supportive tax and regulatory environment,” said NFIB Chief Economist William Dunkelberg. “February was another historically strong month for the small business economy, but it’s worth noting that nearly all of the survey’s responses were collected prior to the recent escalation of the coronavirus outbreak and the Federal Reserve rate cut. Business is good, but the coronavirus outbreak remains the big unknown.”


The White House is looking at a payroll tax cut to ease the pain of Coronavirus. Other measures being considered involve paid sick leave for those who become ill. This is in addition to the big spending bill that was just passed.

35 Responses

  1. Good read:

    “A market crash was coming, even before coronavirus
    Cheap credit saved the global economy in 2008. It just went on for too long.

    By Steven Pearlstein
    March 9, 2020 at 5:02 p.m. EDT”


    • i think the Fed has painted itself into a corner. They tried to just let the balance sheet shrink by only re-investing a portion of the bonds that were maturing and that was causing an issue. Not only can they *not sell*, they have to keep buying.

      Liked by 1 person

  2. This is nuts:

    “Harvard tells students to move out and finish classes remotely after spring break in response to covid-19
    By Susan Svrluga”

    Liked by 1 person

    • Some of this stuff has to be over-worrying about liability. They don’t want to be seen as not having done enough. One student dies because they get Coronavirus and have asthma, and then the family sues. And with all the attention on Coronavirus, I could see them worried about getting sued and getting hit hard.

      I would think that has something to do with it.


    • no cases there… amazing.

      I guess the old American “if it’s worth doing, it is worth overdoing” instinct is kicking in…


  3. Just an FYI, here’s a link to a very science based assessment of the coronavirus. No mention of politics or Trump. As I’ve said before, we don’t have enough information yet to make guesses about how this will go.


  4. Forget Hunter. James is where the real Biden action is:


  5. I wonder how well this will wear the longer the campaign goes on:


  6. NYS is deploying the National Guard to New Rochelle, closing schools for 2 weeks, etc.


  7. I’m passing this on from a friend of mine, here in my area, whose daughter is a pediatrician at what they’re calling ground zero up in WA. Her office is across from the hospital where many of the patients from the nursing home and surrounding area are being taken. Her name is Cate, her mother (my friend who is 64) and her father (who is 72) are taking extra precautions now too. My friend is a runner and a gym rat like me but she’s going to stop going to the gym for now too. We’re both worried about bringing something home with us to our husbands.

    Cate texted me yesterday as she put, it from the ‘COVID-19 ground zero’. She basically told me we need to stay home. No gym, workout at home, etc.. go for runs outside but otherwise stay home. She is mostly worried about her dad. He has asthma, diabetes and other various problems and falls into the high risk age category too. Her words from what she has seen in Seattle were – ‘you don’t want to get this’.


    • went to the gym last night, and it was packed. wonder how much longer that lasts… i have a half marathon in a couple months, might stop lifting for a while and just run outside.

      assuming they don’t cancel the damn race first.


      • They ran the LA marathon last weekend here. Hopefully it won’t be cancelled. My friend runs halfs too. I can’t run anymore but I still hike, walk and swim. I have some weights and resistance bands at home I use sometimes so I’m just doing that for now and walking.


  8. Jeez, just had another appointment of mine for a Healthcare company in Nashville (Lifepoint) cancel a face to face appointment for tomorrow. Get a grip people!


    • I don’t know McWing, I’m seeing people of all political persuasions, young and old stepping up to mitigate exposure to the virus. You may not be at risk, but maybe your clients know someone who is…………..who knows? I think when I consider the number of college students following self imposed quarantine that maybe we’ve done something right?

      I do know that a lot of businesses (including ours) are suffering though so that’s a bummer.


  9. The first third of the comments are either denying or defending Biden’s threat to slap the guy.


  10. NoVA, James Carville channels you:

    “Sean Rameswaram: Do you think there’s something to be said that Bernie Sanders, being such a progressive, could have excited a younger base and perhaps that way taken the —

    James Carville: No, no, that’s the equivalent of climate denial or creationism. You’re not going to change the turnout model. It’s never been done and it’s not going to be done.”


  11. I don’t think a payroll tax cut makes much sense here. Do you?

    After direct spending to mitigate, contain, or cure the virus, it seems to me that an extension of unemployment insurance is probably the surest and cheapest stimulus option. Relaxing work requirements for these benefits to accommodate suggested or mandated isolation is a logistical hurdle, I suppose, but NoVa could be consulted.

    Liked by 1 person

    • the left is going to ask for that. the right will give it to them in exchange for tax cuts.


      • Brent, how does cutting the employee contribution to SS help anything at all, related to people who are actually forced out of work? I am not asking for the politics of it.


        • “I am not asking for the politics of it.”

          I think that’s all Trump cares about at this point.

          Liked by 1 person

        • presumably they will get relief via increased unemployment benefits.

          BTW, i was at a conference last week where people were talking about how hard it is to get employees. Mortgage processors, who normally get 40-50k are getting 100k+… People are hiring workers in their 50s and 60s…

          the labor market is that tight.


      • So it’s a win-win!


    • It’s going to be an accounting and payroll services mess if they do this.

      Liked by 1 person

    • “Relaxing work requirements for these benefits to accommodate suggested or mandated isolation is a logistical hurdle, I suppose, but NoVa could be consulted”

      sorry, Mark, I don’t know much at all about unemployment. unless you meant Medicaid work requirements.

      CMS is going to start issuing blanket waivers and clean up the mess later.

      it’s becoming clear to me that this is a capacity issue, not a lethality one. too many sick people who need intensive care at the same time.


  12. I just read Lancet’s admittedly incomplete review of the Chinese experience with the COVID-19.

    Clinical course and outcomes of critically ill patients with SARS-CoV-2 pneumonia in Wuhan, China: a single-centered, retrospective, observational study

    One excerpt:
    Of 710 patients with SARS-CoV-2 pneumonia, 52 critically ill adult patients were included. The mean age of the 52 patients was 59·7 (SD 13·3) years, 35 (67%) were men, 21 (40%) had chronic illness, 51 (98%) had fever. 32 (61·5%) patients had died at 28 days, and the median duration from admission to the intensive care unit (ICU) to death was 7 (IQR 3–11) days for non-survivors. Compared with survivors, non-survivors were older (64·6 years [11·2] vs 51·9 years [12·9]), more likely to develop ARDS (26 [81%] patients vs 9 [45%] patients), and more likely to receive mechanical ventilation (30 [94%] patients vs 7 [35%] patients), either invasively or non-invasively. Most patients had organ function damage, including 35 (67%) with ARDS, 15 (29%) with acute kidney injury, 12 (23%) with cardiac injury, 15 (29%) with liver dysfunction, and one (2%) with pneumothorax. 37 (71%) patients required mechanical ventilation. Hospital-acquired infection occurred in seven (13·5%) patients.

    You can read it all if you want to, just google with the title I provided above.


  13. Thanks, Brent, Joe and Nova. I get it.


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