Plunging bond yields = mortgage refinancing bonanza

Adjusted for inflation, U.S. bond yields are now negative all the way out to 30 years. Investors seeking a safe place to park their money could push rates even lower, market watchers say, with nominal U.S. rates dropping to zero (or going negative), as in most of Europe and in Japan.

Mortgage brokers are struggling to keep up with demand, especially for refinancing existing loans. Bloomberg reports that some brokers are locking in 30-year mortgages below 3 percent amid a frenzy of activity. This week, the Mortgage Bankers Association reported a 26 percent jump in refinancing applications compared with last week, and a whopping 224 percent rise versus the same time last year.

The picture is mixed for new home purchases, which currently account for around a third of all mortgage applications. “Certainly the virus is a cloud on the market,” Mark Zandi, Moody’s Analytics chief economist, told Bloomberg. “Big purchases like a home are the first thing for people to be more circumspect about.”

Don’t count on insurance to cover coronavirus losses

Scores of companies are staring at big financial losses because of the outbreak, as they face supply shortages and business disruptions. But as the NYT’s Mary Williams Walsh explains, business interruption insurance probably won’t help.

Those policies almost always cite “direct physical loss or damage” as a requirement for payouts. Read: Global virus outbreaks that lead to supplier shutdowns or drops in consumer spending don’t count. (Policies were once more permissive — but that largely changed after the Ebola outbreak in 2014 and the Zika scare in 2015.)

“Companies will have to absorb much of the losses themselves, either directly or with the money that very large companies often set aside in special self-insurance reserves,” the article notes. Businesses may also try to argue that an infection present in a building’s ductwork counts as physical damage.

Some insurers, like Munich Re, offer epidemic insurance. It didn’t prove very popular in the past, and it’s obviously too late to get now. “We can’t insure a burning building,” Christian Ryan of the risk advisory firm Marsh told the NYT.