Capital markets still in turmoil but signs of life are seen... U.S. Treasuries rallied to open the week, including the 10-year yield closing the day -8 bps to 0.67 percent, after President Trump announced that social distancing guidelines will be extended through the end of April. The Fed's buying of higher coupons is having not only little impact on mortgage rates (versus MBS), but the unintended consequence of richer hedges for MBS originators contributing to more margin calls. Unlike Friday, yesterday's operations saw smaller takes and low hit rates, and the Fed lowered the "tentative maximum" from $40 billion to $30 billion going forward. For the day, the Desk purchased $20.7 billion MBS of the maximum $40 billion, 52 percent of the expected planned purchases and 48 percent of the $42.8 billion submitted. Total purchases since the Fed restarted QE purchases on March 13 now stand at $271.7 billion.
Today's economic calendar sees a quartet of releases: Redbook same store sales for the week ending March 28, the S&P/Case-Shiller Home Price Index for January, March Chicago PMI, and Dallas Fed Texas services and revenues for March. The Desk will target up to $30 billion MBS for today's month-end session (mostly current coupons). We begin today with Agency MBS prices better by .125 and the 10-year yielding .70 percent.
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