March 19, 2020 Headlines

Treasuries are rallying this morning, which is a good thing after the last two trading sessions. Liquidity has been virtually non-existent in broad fixed income markets and was particularly bad the last two days. Spreads on GSE-backed sectors have widened significantly, presenting opportunities for long-run investors with stable funding sources. At the same time, intermediate and long-end Treasury yields rose 30-50 bps despite stocks being significantly lower as another sign of dislocated markets. In other words, all assets have been for sale. The European Central Bank stepped in last night, announcing a $800+ billion increase in its existing QE program and expressing a willingness to do whatever is necessary to support markets. Also, the Fed said last night that it is launching another emergency facility to support money market mutual funds. The Fed is also increasing its Treasury purchases today from $50 billion to $75 billion, and it will likely increase the overall purchase program if liquidity pressures don’t subside. On the fiscal front, Congress and the White House continue to work out the final details of a phase three stimulus package that is expected to exceed $1 trillion.

Jason Haley
Chief Investment Officer

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