Morning Report – Taper Day 09/18/13

Posted on September 18, 2013 by Brent Nyitray

Vital Statistics:

	Last	Change	Percent
S&P Futures	1698.8	0.5	0.03%
Eurostoxx Index	2907.4	16.4	0.57%
Oil (WTI)	105.8	0.4	0.39%
LIBOR	0.252	0.001	0.20%
US Dollar Index (DXY)	81.14	0.001	0.00%
10 Year Govt Bond Yield	2.86%	0.01%
Current Coupon Ginnie Mae TBA	103.7	0.0
Current Coupon Fannie Mae TBA	102.8	-0.1
RPX Composite Real Estate Index	200.7	-0.2
BankRate 30 Year Fixed Rate Mortgage	4.48

Markets are flattish ahead of the FOMC meeting this afternoon. The announcement is expected around 2:00pm, so don’t try and lock anything around that time period. Bonds and MBS are down small.

Mortgage applications rose 11.2% last week, which was a big increase after a depressed short Labor Day week. The refi index jumped 18% as rates ticked down a little. The purchase index was up 2.5%.

Housing starts and building permits came in lower than expected, with housing starts at an annualized 891k and permits at an annualized 918k. SFR continued to increase while multi-fam dipped. Sub – 1 million levels in housing starts is still a highly depressed level. After touching 1 million units in March, activity has been slowing. You can see from the chart we have been underbuilding for a long time. I guess you won’t see a major increase in starts until the first time homebuyer returns to the market and that is going to be jobs-driven. In related news, the National Association of Homebuilder Confidence Index was flat last month, but still at post-crisis highs. The builders are also noting that momentum seems to have stalled for the moment.

Certainly the Fed is noticing the drop-off in housing sector activity as rates have risen. This will probably make them want to maintain current purchases of MBS and cause them to lower Treasury purchases only. The consensus seems to be the “tiny taper” scenario, where the Fed cuts Treasury purchases by $10 billion a month starting in October.

The SEC is going to force companies to disclose the ratio of CEO pay to the median pay of employees at the firm. Glad to see the SEC is on class warfare beat – much more important than, say, doing something about high frequency trading /sarc.

Filed under: Morning Report |

19 Responses

Troll McWingnut or George, whichever, on September 18, 2013 at 7:37 am said:

Lame Duck.

http://thehill.com/homenews/administration/322903-obama-distress-signal-president-seeks-help-from-first-term-a-team

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- markinaustin, on September 18, 2013 at 7:57 am said:
  
  http://thehill.com/homenews/administration/322903-obama-distress-signal-president-seeks-help-from-first-term-a-team
  
  I cannot tell whether this article thinks BHO talking to old advisors is good, bad, indifferent, or de rigeuer. The headline is unrelated to the content, as is often the case in journalism. This is by no means a new development. The authors of an article generally do not write the headline and the headline writers are taught how to capture the attention of the reader, which may lead to callous disregard of article content.
  
  There are PL commenters who assume articles they link are about their headlines.
  
  Did anyone else notice how Sargent did not even offer his sympathies for the families of the wounded and killed in the Naval Yard? Shooting in FL, or CO, or CT and he is all over it, but in his home town, silence. Somehow this story did not play into his “epidemic of gun violence” narrative that I objected to, regularly, when I used to go there, regularly.
  
  So for that it got silence.
  
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Michigoose, on September 18, 2013 at 9:05 am said:

jnc (if you wander by): what happened in June 2009?

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jnc4p, on September 18, 2013 at 9:45 am said:

Meaning from the PL conversation? That’s when I wrote President Obama off on financial reform and actual health insurance reform. This was due to the administration sabotaging Richard Durbin’s effort to implement bankruptcy cramdown in order to continue pretend and extend as a banking policy and also when they rejected Wyden-Bennett and anything like it in favor of what eventually became the PPACA.

And of course the stimulus was mostly grab bag of existing Democratic programs that they were looking to fund under “a crisis is a terrible thing to waste”.

Lastly, Obama had proposed his first budget that cut spending by 1/2 of one percent after promising to go through the budget to weed out all the outdated and ineffectual programs.

It was clear at that point that he was totally full of shit.

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Michigoose, on September 18, 2013 at 10:07 am said:

Gotcha.

I still don’t think he’s totally full of it, but I’m most definitely in the disappointed column. Sadly, neither of the alternatives would have been any better, and would, arguably, be much, much worse.

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Michigoose, on September 18, 2013 at 10:11 am said:

Republican war drumbeat du jour:

Sen. Lindsey Graham (R-S.C.) said Tuesday he’s working on legislation that would give the president the green light to attack Iran if negotiations over the country’s alleged nuclear weapons program stall.

Graham, one of the GOP’s most prominent hawks, told reporters on Tuesday that he’s worried the administration’s failure to get congressional approval for a strike against Syria has emboldened Iran. He said he’ll be working with Democrats and Republicans on legislation that would encourage diplomacy, threaten more sanctions and authorize military action as a last resort.

“I do believe without the threat of credible military force by us, the Iranians are going to just slow-walk,” Graham said. “So I’m trying to create the dynamic that there is bipartisan support for continued diplomacy, sanctions and the use of force as a last resort.”

Graham said Iran has been pursuing its weapons program while the Obama administration – and the rest of the world – has been focused on Syria. He said U.S. policymakers should urgently refocus their attention.

“The Iranian debate should begin pretty soon – what should we do, and how should we do it?” Graham said. “I do believe that it’s important for [the president] to have in his back pocket if negotiations get serious an authorization to use force.”

The comments come as Israeli Prime Minister Benjamin Netanyahu is slated to meet with President Obama on Sept. 30 ahead of his address to the UN General Assembly. At the top of their agenda: Iran.

From The Hill: http://tinyurl.com/msg8ph4

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- ScottC, on September 18, 2013 at 10:31 am said:
  
  “So I’m trying to create the dynamic that there is bipartisan support for continued diplomacy, sanctions and the use of force as a last resort.”
  
  Is this warmongering nutcase trying to kill us all? The world needs to be secure in the knowledge that Obama will never use force, not even as a last resort.
  
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  - markinaustin, on September 18, 2013 at 10:53 am said:
    
    The world needs to be secure in the knowledge that Obama will never use force, not even as a last resort.
    
    Huh?
    
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    - ScottC, on September 18, 2013 at 11:35 am said:
      
      Mark:
      
      Huh?
      
      Sorry, I was being sarcastic. I don’t think it makes any more sense to characterize what Graham said as beating the drums of war than it does to characterize O’s “unnacceptable” and “I don’t bluff” talk as beating the drums of war. Unless, of course, one just assumes that when O talks like that he is being transparently disingenuous, while Graham is not.
      
      BTW, also worth noting from that O link is this:
      
      “I also don’t, as a matter of sound policy, go around advertising exactly what our intentions are.”
      
      I guess John “unbelievably small attack” Kerry never got the memo.
      
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Michigoose, on September 18, 2013 at 10:45 am said:

I loved this campaign ad:

http://www.youtube.com/watch?feature=player_embedded&v=Z3S1zcbWkoM

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Troll McWingnut or George, whichever, on September 18, 2013 at 11:01 am said:

Look, President Drone Strike only likes stand off weapons. Chillax.

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Troll McWingnut or George, whichever, on September 18, 2013 at 11:03 am said:

I’m pretty sure Graham and McCain (BIRM) are willing to invade any country but Mexico.

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Michigoose, on September 18, 2013 at 11:06 am said:

I’m pretty sure Graham and McCain (BIRM) are willing to invade any country but Mexico.

Canada?

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Michigoose, on September 18, 2013 at 11:07 am said:

Mark:

Huh?

I’m pretty sure that’s Scott being sarcastic.

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Troll McWingnut or George, whichever, on September 18, 2013 at 11:21 am said:

Yes.

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Michigoose, on September 18, 2013 at 11:27 am said:

McWing:

Yes.

Hm. . . I could go in undercover using my fake UPer (pronounced “you-per”) accent and gather intel. Eh?

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Troll McWingnut or George, whichever, on September 18, 2013 at 11:55 am said:

Over the weekend Biden said that Kerry was the best SoS of all time.

Jesus.

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- ScottC, on September 18, 2013 at 12:02 pm said:
  
  No taper. Low rates in perpetuity.
  
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jnc4p, on September 18, 2013 at 12:05 pm said:

“Michigoose, on September 18, 2013 at 10:07 am said:

Gotcha.

I still don’t think he’s totally full of it, “

In terms of this statement from his 2008 acceptance speech, he absolutely was.

“But I will also go through the federal budget line by line, eliminating programs that no longer work and making the ones we do need work better and cost less, because we cannot meet 21st-century challenges with a 20th-century bureaucracy.”

http://www.nytimes.com/2008/08/28/us/politics/28text-obama.html?pagewanted=all&_r=0

To make that statement and then propose cuts of 0.5 percent of the budget is simply insulting the intelligence of anyone who pays attention.

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