March 25, 2020 Headlines

Congress and the White House have come to an agreement on a $2 trillion fiscal stimulus package to support the economy amid the COVID-19 crisis. The Senate is expected to vote on the bill today, and while details are still emerging, it is expected to provide direct support to individuals/families, businesses, hospitals, and state/local governments. Corporations are expected to be allocated $500 billion in loans, including a dedicated amount for airlines, and the loans are expected to have various restrictions related to stock buybacks and executive compensation. Small businesses should receive $350 billion of aid, and hospitals and other health-care providers will be allocated $150 billion. Individuals up to a certain income level will receive $1,200 per adult and $500 per child (checks reportedly to be delivered on April 6), and unemployment insurance will be increased by $600 per week and extended to fourth months (eligibility would also be expanded). U.S. equity futures were initially lower overnight ahead of the announcement but have since rebounded and are modestly higher ahead of the open. Treasuries are little change at the moment, but both credit and MBS spreads are tighter again to start the day, with recent Fed efforts continuing to filter through fixed-income markets.

The MBA Mortgage Applications Index fell 29.4% for the week ended March 20, led by a 34% decline in refi applications. The refi index is now down 45% over the last two weeks coinciding with surge in primary rates. The MBA 30-year survey rate is up 35 bps to 3.82% over the last two weeks, but large bank originators have been posting 30-year conforming refi rates in the 4.5% to 5% range for much of the last 2 weeks in response to capacity constraints and COVID-19 operational issues.

Jason Haley
Chief Investment Officer

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