MBS RECAP: Bonds Not Caring About Virus? Or Something Else Going On?

Stocks moved higher today and bond yields did the same. Given that coronavirus has been the key consideration for both sides of the market, the movement is a bit counter-intuitive considering the virus continues to spread exponentially. Nevertheless, there are a few potential explanations. The disease outlook could actually be improving (relative to expectations). A certain amount of deterioration in the viral outlook is assumed to have already been built into the trading response. Markets have seen viral outbreaks before and thus have a curve by which to measure this one. If it's falling short of that curve, markets can ease up a bit. Some experts are already predicting the exponential phase to crest within 1 week. If numbers keep that hope alive, bonds could indeed continue to weaken...(read more)

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