Treasury yields come off lows as crude-oil surge lifts inflation expectations

U.S. Treasury yields bounced off their lows on Thursday as a surge in oil prices spurred by hopes of coordinated production cuts between Saudi Arabia and Russia helped to lift inflation expectations, a bugaboo for bondholders.

Investors also saw a back-to-back jump in U.S. weekly jobless claims, closing the curtain over one of the strongest labor markets in American economic history.

What are Treasurys doing?

The 10-year Treasury note yield

TMUBMUSD10Y, +5.05%

 was virtually unchanged at 0.624%, off an intraday low of 0.567%, while the 30-year bond yield

TMUBMUSD30Y, +2.70%

 was down 1.7 basis points to a three-week low of 1.268%, but up from a intrasession nadir of 1.207%.

The 2-year note rate

TMUBMUSD02Y, +9.23%

  was down 1.4 basis points to 0.218%, around its lowest level since May 2013.

What’s driving Treasurys?

President Donald Trump said in a tweet that he had talked to Saudi Arabia and Russia, and that he expected to see oil production cuts of up to 15 million barrels a day.

His comments helped to push up oil prices and inflation expectations, based on trading in Treasury inflation-protected securities. Bond investors’ inflation prospects over the next decade, or breakeven rates, rose by around 11 basis points to around 1.03% on Thursday.

Higher oil prices and inflation pressures can weigh on government paper by eroding the value of their fixed-interest payments. The surge in inflation expectations in TIPs also reflected the lack of liquidity in certain corners of the Treasurys market, said market participants.

Trump’s comments helped to offset disappointing economic data that had provided a bullish tilt in early trading on Thursday. Americans filing for unemployment benefits for the weekly period ending March 28 surged by 6.65 million, following a 3.28 million rise in initial jobless claims in the week before. Economists polled by MarketWatch had forecast claims to surge by 4 million.

As an up-to-date indicator of the job market’s travails, the claims number highlights the disruptions that are threatening to throw the world’s largest economy into a recession.

In other data, the trade deficit fell $39.9 billion in February, down from $45.3 billion in January.

See: Jobless claims leap record 6.6 million at end of March as coronavirus triggers mass layoffs

What are market participants saying?

The surge in inflation expectations “speaks to how illiquid the TIPs market is,” said Michael Lorizio, senior fixed-income trader at Manulife Investment Management. “Pre-crisis, breakevens were anchored at a tight range. The problem is you’re continuing to see illiquid pockets in the Treasurys market like TIPs, which are illiquid even on its best day.”

“More people are applying for unemployment insurance as more segments of the economy are shutting down in the wake of the coronavirus,” said Andrew Smith, chief investment officer of Delos Capital Advisors, in a note.

“Companies will take a considerable amount of time to re-hire workers. The longer it takes for the economy to restart, the longer companies will take to get back into gear,” said Smith.

What else is on investor radars?

The Federal Reserve temporarily eased capital requirements for banks on Wednesday, allowing them to increase their balance sheets and lend out funds to households and businesses.

The Fed’s actions may encourage Wall Street’s near two dozen primary dealers to facilitate trading in the bond-market to ramp up their operations and soothe liquidity issues that briefly seized up liquidity in the Treasurys market last month, analysts said.

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Online dating amid coronavirus: Longer chats and fewer new prospects, Match says

As COVID-19 has spread across the globe, online daters are having longer conversations but finding fewer new dating prospects, Match Group Inc. said Tuesday, which is leading to a change in strategy.

The new chief executive of Match Group

MTCH, -0.94%

 — which owns Tinder, and other online-dating properties — wrote a letter about the effects of the coronavirus pandemic that was posted Tuesday on the company’s website and filed with the Securities and Exchange Commission. In it, she said that the length of Tinder users’ conversations increased 10% to 30% after the virus struck their countries, but services were struggling to attract new users (especially those older than 30) and paying subscribers in countries hit hard by infections.

“In Europe, we’ve seen new subscriber declines of around 5% in aggregate since the crisis began, but in countries severely impacted by COVID-19, like Italy and Spain, we have seen more significant declines,” CEO Shar Dubey wrote. “In the U.S., the impact also depends on the level of cases in the region and varies by brand. For example, Tinder in New York State has seen low double-digit declines in new subscribers since the outbreak accelerated, but much of the rest of the country has held up much better.”

See also: This is why loneliness and dating apps are such a bad match

As a result, Dubey said that Match was looking to “pivot” to quickly add video chat to more of its services. Dubey said Match had begun rolling out video chat on two services, Plenty of Fish and Twoo, and that usage had “exceeded our expectations.” The company now plans to roll out one-on-one video-chat services on its namesake service in early April.

“As nearly every aspect of our lives is now conducted via video, singles are also becoming increasingly comfortable with video dates, and we are integrating video chat into our apps,” she wrote. “We have offered video chat features in the past and seen low usage, but we think this time user behavior is likely to change more permanently.”

Match did not mention any plans for video on Tinder, its mobile-focused dating app. A spokeswoman said that the company had nothing to add beyond the letter.

The company also did not mention if it plans to charge for any video-chat offerings as part of subscription services like Tinder Gold, which have powered much of Match Group’s gains in recent years. Earlier this month, JP Morgan analyst Doug Anmuth cut his target for Match’s 2020 revenue by 15% because he expected to see “less social interaction likely weighing on dating subscriptions, which are largely month-to-month & easy to turn on and off.”

Jefferies analysts raised their price target after the news Tuesday, because Dubey said that Match’s first-quarter results would likely come in at the low end of the company’s guidance range, which called for sales of $545 million to $555 million. The analysts wrote that performance was better than feared, and the letter suggested Match “was likely on pace to exceed 1Q expectations prior to the COVID dynamic.”

“No recession in love,” they wrote, while bumping the target to $74 from $65.

Read: More people meet online than through friends or family or work

The letter also noted that the company’s divorce from parent company IAC/Interactive Corp.

IAC, -0.43%

 is on track to be completed in the second quarter, but the pandemic could impact that as well.

Match stock declined 19.6% to a market cap of roughly $18.7 billion in the first quarter of 2020 as the novel coronavirus spread across the globe, roughly in line with an 18.7% decline for the S&P 500 index

SPX, -1.60%

 . Shares fell 2.1% in late trading Tuesday. No analysts tracked by FactSet suggest selling the stock, with 10 rating it a buy and eight rating the shares as a hold.

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Outspoken Wall Street bond whiz says the stock market is acting ‘dysfunctional’ and may hit rock bottom once we take out March’s low

Jeffrey Gundlach on Tuesday said that the worst isn’t over for the stock market, after a brutal quarter that left the Dow with its worst decline in the first three months of a calendar year in its 124-year history.

Speaking during a webcast, the DoubleLine Capital founder said that the stock market remains “dysfunctional” from his perspective, indicating that the market may put in a more “enduring low,” once the March 23 nadir for stocks is “taken out.”

The Dow Jones Industrial Average

DJIA, -1.84%

 on March 23 finished at 18,591.93, its lowest close since Nov. 9, 2016, which left it with a pullback of more than 37% from its all-time closing high set in February. The S&P 500

SPX, -1.60%

, on the same day, ended at 2,237.40, its lowest close since Dec. 6, 2016, marking a nearly 34% pullback from its record finish.

From that point, the indexes then began a rebound that saw the Dow log its biggest three-day gain since 1931, and many strategists have speculated that the worst may be over for stocks after President Donald Trump last week signed the more-than-$2 trillion relief package and the Federal Reserve has rolled out a barrage of stimulus measures to ease gummed-up parts of the financial market.

Read: April poses crucial stock-market test as coronavirus promises ‘blizzard of bad news’

Gundlach speculated that the market could slide lower still. “I would bet that will get taken out,” he said, referencing the March nadir.

A day after the March low, the DoubleLine CEO speculated that the S&P 500 could jump to 2,700 before the coronavirus relief package was signed into law.

The S&P 500 hit an intraday March 24 peak at 2,637.01, but has mostly been retreating since then.

At the beginning of March, the Los Angeles bond-fund manager offered what turned out to be sage advice, recommending that investors stay in cash during the coronavirus pandemic.

He advised investors back then to pay attention to the economic data that will reveal the damage wrought by COVID-19, which has so far caused a near-global shutdown as governments across the world attempt to mitigate the spread of the deadly infection, which has been contracted by more than 850,000 people and killed 42,000 so far, according to data compiled by Johns Hopkins University.

Gundlach said watching the direction of weekly U.S. jobless claims data, along with consumer confidence, could be helpful in seeing how households — the linchpin of the economy — are holding up.

Weekly jobless claims reported on Thursday were the worst in history, surging to 3.28 million people seeking unemployment benefits.

On Tuesday, Trump attempted to underscore to Americans that the road ahead will be a tough one, noting that we are facing a “very, very painful two weeks,” during a daily coronavirus news briefing. “This is going to be a rough two-week period,” the president said.

On Tuesday, stocks, slammed by uncertainty surrounding the illness, ended sharply lower, with the Dow marking its worst quarterly performance since 1987, the S&P 500 index marking its sharpest quarterly fall since 2008 and the Nasdaq Composite Index

COMP, -0.95%

  notching its worst quarterly slide since the fourth quarter of 2018.

Read: Only one stock in the Dow rose during the first quarter — and it was up by only one penny

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Home price growth ramped up yet again in January, Case-Shiller index shows

The numbers: The pace of home-price appreciation once again ramped up in January, according to a major price barometer.

The S&P CoreLogic Case-Shiller 20-city price index posted a 3.1% year-over-year gain in January, up from 2.8% the previous month. On a monthly basis, the index increased 0.3% between December and January.

Because of the two-month lag in the data included in the price index, the effects of the coronavirus pandemic on the housing market were not yet reflected in the data.

What happened: Phoenix led the nation once more with a 6.9% annual price gain in January. Close behind were Seattle, Tampa, Fla., and San Diego, where prices rose by 5.1%. In total, 14 of the 20 cities in the index reported higher price increases year-over-year in January versus December.

On a regional basis, home price growth was strong in the West and the South, while comparatively weak in the Midwest and the Northeast, said Craig J. Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices.

The big picture: The Federal Housing Finance Agency released its own monthly home-price index last week, which showed a 5.2% year-over-year gain in January. While home-price growth has accelerated in recent months, a year ago the pace of appreciation was actually slightly higher in most regions across the U.S., the FHFA report showed.

As the low supply of homes on the market has been met with high demand, home prices have been pushed higher. Low mortgage rates in recent months have encouraged that trend, because the low rate environment can make higher prices more palatable to buyers who might otherwise find them too expensive.

The question for the market now is whether home prices will take a hit as a result of the coronavirus pandemic. While real-estate economists broadly expect sales volume to plummet, it’s unclear what effect the COVID-19 national health emergency will have on prices. A recent report from Zillow

ZG, +2.79%

 that analyzed what happened to the economy of regions affected by past disease outbreaks suggests that home prices may not fall along with sales.

What they’re saying: “Home prices increased nearly every month in 2019 and continued to push upward in early 2020 with strong demand,” said Bill Banfield, executive vice president of capital markets at Quicken Loans. “It’s yet to be seen how home prices will react through, and after, the current health crisis. I suspect once the stay-at-home orders are lifted, homebuyer demand will regain its footing, provided employment rebounds quickly.”

Market reaction: The Dow Jones Industrial Average

DJIA, +0.36%

 and the S&P 500

SPX, +0.21%

  both opened lower Tuesday as coronavirus concerns lingered. The 10-year Treasury note’s yield

TMUBMUSD10Y, -5.37%

  was also down Tuesday morning.

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Caught out by big market swings, U.K. traders rushed to short stocks in March. That’s a 40% surge since the same time last year.

Investors caught flat-footed by huge swings in markets in the first weeks of March piled into short positions in U.K. stocks — a 40% surge since the same time last year.

That is according to data by exchange-traded funds provider GraniteShares, which calculated 507 short positions reported to Britain’s regulators between Mar. 1 to 15 in 2019. That figure surged to 712 over roughly the same period this year, or 40% higher.

Will Rhind, founder and Chief Executive at GraniteShares, said the data would appear to show that initially investors were taken by surprise, and therefore not able to hedge portfolios in a way that might be expected.

In January and February 2019 there were 906 and 865 short positions respectively reported to the Financial Conduct Authority. The corresponding figures for the first two months of this year were 719 and 833 respectively, which is a decline of 219 or 12%.

That is a signal traders were caught by surprise, as they scrambled to snap up short bets in early March as the novel coronavirus spread.

“The coronavirus has led to huge volatility in the world’s stock markets with billions of dollars being quickly wiped off valuations,” Rhind said. “On a daily basis, there is an update of the human tragedy of this virus, and understandably this has spooked investors, including the more sophisticated ones who look to hedge risk by shorting stocks.”

Short sellers place bets on shares that they expect to fall in price. They pay a fee to borrow shares in a company and then sell them in the hope of buying them back at a lower price and pocketing the profit.

Last week, the EU’s market watchdog announced temporary measures to lower the threshold at which investors must report to national regulators on short selling positions to track short sellers amid the market volatility caused by the coronavirus pandemic.

Unlike in the U.S., many European regulators require public disclosure of any short position that makes up 0.5% of a company’s shares.

The new rules from the European Securities and Markets Authority (ESMA), which also apply to the U.K., mean that any short position that accounts for 0.1% or more of a company’s outstanding shares must be announced to the market regulator. That compares with the previous threshold of 0.2%.

ESMA said the move was made under “exceptional circumstances” linked to the continuing coronavirus pandemic. The move follows new all-out bans on short selling in France, Italy, Spain and Belgium.

In November last year, GraniteShares launched a range of short and leveraged single stock daily Exchange Traded Products (ETP) on the London Stock Exchange, allowing investors to take positions on both rising and falling share prices. In addition to this, they can also be used to hedge individual stock exposures, including those in index or fund holdings.

The best-performing GraniteShares inverse ETP was financial services company Barclays

BARC, -2.09%,

which delivered a return of 52.3% between close of business on Feb. 21 and 28, 2020, against the share price falling by 17.2%.

The second-best performing GraniteShares inverse ETP was mining company Rio Tinto

RIO, +0.69%,

which delivered a return of 51.6%, followed by commodity trader Glencore

GLEN, +1.93%,

with a return of 50.9%. The ETP with the lowest return was engineering company Rolls-Royce

RR, +4.20%,

which despite the strong bounce on the back of its results announcement on Feb. 21, still delivered 10.5% over the week.

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