Vital Statistics:
Last
|
Change
|
Percent
|
|
S&P Futures
|
1673.5
|
3.8
|
0.23%
|
Eurostoxx Index
|
2915.7
|
13.6
|
0.47%
|
Oil (WTI)
|
103.6
|
0.3
|
0.32%
|
LIBOR
|
0.243
|
0.000
|
0.00%
|
US Dollar Index (DXY)
|
79.98
|
0.233
|
0.29%
|
10 Year Govt Bond Yield
|
2.63%
|
0.02%
|
|
Current Coupon Ginnie Mae TBA
|
105.6
|
0.1
|
|
Current Coupon Fannie Mae TBA
|
105.1
|
0.2
|
|
RPX Composite Real Estate Index
|
200.7
|
-0.2
|
|
BankRate 30 Year Fixed Rate Mortgage
|
4.25
|
Markets are
higher this morning on no major news. Since we have the government shutdown,
the all-important jobs report that was scheduled for this morning will be
delayed. Bonds and MBS are down small.
Even though we
don't have any economic data today, we have a lot of Fed-speak. Fisher will
talk at 8:30, Dudley at 9:15, Stein at 9:30, Lacker at 12:30, and Kocherlakota
at 1:45 (all times EST). With no data to chew on, the market will probably
react more strongly to any new revelations than it otherwise would.
With no economic
data to analyze, the Fed will almost certainly maintain its present course of
asset purchases at the October FOMC meeting. While the Fed does have their own
econometric models and independent sources of data, they do rely on inputs from
the Federal government agencies. The bigger question is about December. Does
Ben Bernanke want to start the tapering process on his watch or throw the whole
thing to Janet Yellen? And does Janet Yellen want to taper at all? She may not.
This whole shutdown has thrown a wrench in the conventional wisdom over
tapering, which means QE may stick around a little while longer than we
thought. Doing nothing at the December meeting is still a long-odds scenario,
but it is getting less and less so.
The dynamic I
would watch in the bond market is that anything that points to a deal would be
bond bearish, and continued gridlock is bullish. Here is one area of concern
though - the short term Treasury markets. I already discussed the issues with
the repo market and here is another: the 1 month T-bill has increased in yield
as the debt shutdown has gone on. It is now a higher yield than the 1 year. Heard
on the Street has a piece on
how a debt ceiling breach will impact the money markets. While no one
anticipates another 2008, things could get dicey. If anything is going to push
the S&P 500 over the edge and get everyone's attention in Washington, this
will.
Chart: 1 month
T-bill yield
We are starting
to see the Federal government move towards bringing back items piecemeal.
Currently there is are bills that would commit
to pay furloughed federal workers their
back pay once government gets back up and running. Naturally Democrats don't
like these sort of bills because they want to use the leverage of mad
constituents to force Republicans to drop their opposition to a clean
continuing resolution. Republicans are taking a page out of the sequester
strategy, where they fixed the air traffic controller problems with a simple
bill. Behind the scenes, the Tea Party is wearing thin on most everybody and at
some point the more senior Republicans are going to say enough is enough.
Separately, John Boehner is telling
people he will avoid a default on the federal debt. It is looking more and
more likely that any sort of deal with be a two-fer,
handling the budget and debt ceiling.
HUD
has released its own rule on QM - any
mortgage (aside from HECMs) that do not meet the points and fees requirements
will not be eligible for insurance. This is a proposed rule, which will be open
for comment. HUD will handle the points and fees a little differently: Under
CFPB, the APR has to be below 150 bps over the average prime rate offer (APOR).
Under the HUD proposal, it has to be less than 115 basis points over APOR plus
the mortgage insurance premium. This intends to alleviate concerns that higher
MIPs are causing loans to breach the threshold. HUD believes MIP will add about
135 bps to APR, so, the punch line is that a loan that is withing 250 bps of
APOR would fall within safe harbor.
Banks are abandoning
mortgage pre-approvals, according to CNBC and moving towards conditional
approvals that usually last about 90 days.
Brent Nyitray, CFA
Dellacamera Capital Management
iDirect Home Loans
1010 Washington St, 6th floor
Stamford CT 06901
T: 203-817-3614
C: 917-841-4938
AIM bnyitray
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