MBS Live Day Ahead: False Alarm, But Still on Guard

Yesterday offered up a fairly intense trading session for the bond market.  Yields moved to the lowest levels in months with 10yr Treasuries hitting 1.534 in the afternoon.  Shortly thereafter, the World Health Organization (WHO) officially declared coronavirus to be an international public health emergency.  While that sounds like it might be good for bonds, the reaction was quite the opposite.

The WHO's announcement helped stocks and hurt bonds because it paves the way for a more robust international response to the crisis.  A more robust response would theoretically decrease the time frame of the epidemic and thus the economic impact.  Additionally, the WHO reprimanded countries who have ghosted China in one of several ways (travel, trade, and screening were mentioned).

Bond yields bounced fairly quickly and were soon back in negative territory.  Given the nature of the underlying news, it was more than fair to wonder if this would mark a turning point in the low rate trend associated with coronavirus.  While it may still fill that role in hindsight, this morning's trading suggests such things have yet to be decided.  Simply put, we bounced at the 1.60% pivot point and are back near yesterday's stronger levels to begin today's trading session.

The only big market mover on tap in terms of economic data is the 9:45am Chicago PMI, but that only tends to have a big impact if it's wildly higher or lower than forecast.