Just another manic Monday
March 23, 2020
–Stocks have fought back and are off the -5% limit as of this writing, with initial selling pressure the result of more bad virus news and congressional wrangling prior to passing a big emergency rescue package. EDJ0 (April 3-month euro$) is currently down 8 bps at 9906, or 94 bps, with tremendous demand for near term funding. However, EDU0 is unch’d and further back there are gains, with golds +3.5 to 4. There are warnings about the commercial mortgage market seizing which isn’t too surprising given that cap rates had compressed and it was one sector that the Fed had cited for risk before anything even occurred with the virus. All of the lobbies that had been re-modeled with seating and gathering areas are just empty, with office employees now opting for the purchase of stay-at-home slippers.
–On Friday I marked tens down 19.5 bps near the futures settlement time, at 93.4 bps. Current TYM is 137-205, +29/32’s which is around another 10 bps. Red pack in euro$’s is +2.5 currently; the curve is flattening.
–A headline on Reuters says Goldman expects global GDP to decline by 1% this year. Seems shockingly inconsequential given that the same firm looks for a plunge of 24% in US Q2 GDP.
–A doctor in Italy was quoted as saying that they are not treating patients over 60 due to limitations on medicine and equipment. The question going forward is who decides which companies are going to get a life-rope of near zero rate funding in order to survive. This process will take over a year to play out in my opinion, even if the virus can be contained over the next three months.
–Markets remain wide with little volume.
