Coronavirus has been with us for so long and has caused such a huge paradigm shift that it's easy to lose sight of its importance as a day-to-day market mover. Periodically we see moves that reinforce the importance (like today) where both stocks and bonds are unequivocally responding to vaccine headlines.

The first headlines hit during the only hour of the day where both stocks and bonds are completely closed (5pm-6pm ET).  When futures trading started at 6pm, both stocks and bonds jumped quickly higher with nothing else to blame but updated results from the Moderna Vaccine trial.  

Later in the overnight session, a story in The Lancet spoke favorably about a vaccine being developed at Oxford and slated to be produced by Astra Zeneca.  Markets were clearly willing to respond.

20200715 open.png

As we often discuss, the correlation between stocks and bonds is easiest to see over shorter time horizons.  If we zoom in the chart to focus only on the movement that has occurred so far in today's session, we can see just how well-aligned both sides of the market are.

20200715 open2.png

What's the point?  Sure, the correlation is interesting, but what does it tell us about where we are and what might happen next?  Simply put, it confirms that both sides of the market are incredibly focused on the coronavirus outlook.  While that is certainly no surprise, it's important to see how willing stocks and bonds are to respond to mere HOPE that something MIGHT be effective in granting human immunity.  The bottom line is that there is a constant risk to the ultra low rate environment.  The headlines moving markets today are barely worth printing.  If some actual, meaningful vaccine progress comes to light, it stands a good chance of being at ground zero of a big picture shift for bonds and rates.


MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
MBS
UMBS 2.0
102-23 : -0-03
Treasuries
10 YR
0.6550 : +0.0410
Pricing as of 7/15/20 8:56AMEST

Tomorrow's Economic Calendar
Time Event Period Forecast Prior
Wednesday, Jul 15
7:00 MBA Purchase Index w/e 325.2
7:00 Mortgage Refinance Index w/e 3373.9
8:30 Export prices mm (%) Jun 0.8 0.5
8:30 NY Fed Manufacturing Jul 10.00 -0.20
8:30 Import prices mm (%) Jun 1.0 1.0
9:15 Industrial Production (%) Jun 4.3 1.4