Corona Data, Treasury Decline, Fed Emergency Cut

Coronavirus – the larger 40 page report can be found here. There is plenty of memes and noise circulating about the virus, here is a report from the World Health Organization. In this study of over 44,000 infected individuals 3.4% died. Certain factors heightened chance of fatality including: gender (males 4.7% vs 2.8% female), age (50+), cardiovascular disease (13.2%, high blood pressure(8.4%), diabetes (9.2%), chronic respiratory disease (8%), and cancer (7.6%). The most interesting thing I found in this article was China’s impressive non-pharmaceutical response and that employees receive sick pay during quarantine.

Rates – The 10 Year US Treasury continues break all-time lows. Rates, also at all-times lows, have not kept pace with this steep Treasury decline. Refinance volume is up dramatically and investors are throttling to manage volume and fear of Early Pay Offs (EPOs – a premium charged to lenders when someone pays off their loan within approximately 6 months of purchasing. This used to be mitigated with pre-payment penalties but those are no longer legal on most loan programs). Some banks are charging higher rates for refinance than purchase. Most lenders are prioritizing purchase business with faster turn times and there are even title companies refusing refinance business momentarily.

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Jobs – another really strong BLS jobs report for the month of February. Weekly earnings increased by 0.5% up to a 3% year-over-year increase. Normally this would be a sign of increasing inflation that might push rates up but the economic impact of Corona had not fully hit in February so investors are viewing this with a grain of salt.

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Fed – the Fed issued an emergency rate cut of 0.5% – the first time since 2008. Normally this might entice investors to put their money back on the stock market but a rate cut is not a vaccine and the central bank has now depleted much of their ammunition.

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Home Values – continue to improve. In January they increased 4.0% on a year-over-year basis and Core Logic predicts continue appreciation of 5.4% over the next 12 months. On a $300K home that is a gain of $16,200.

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