Morning Report – Government shutdown looms 09/30/13

Posted on September 30, 2013 by Brent Nyitray

Vital Statistics:

Last Change Percent
S&P Futures 1670.9 -15.5 -0.92%
Eurostoxx Index 2882.4 -36.9 -1.26%
Oil (WTI) 101.7 -1.2 -1.15%
LIBOR 0.249 0.001 0.20%
US Dollar Index (DXY) 80.14 -0.382 -0.47%
10 Year Govt Bond Yield 2.61% -0.02%
Current Coupon Ginnie Mae TBA 105.7 0.1
Current Coupon Fannie Mae TBA 104.9 0.1
RPX Composite Real Estate Index 200.7 -0.2
BankRate 30 Year Fixed Rate Mortgage 4.33
Markets are lower as participants contemplate a government shutdown. The Street has viewed this issue as a kabuki dance, but we are now getting to the short strokes. Bonds and MBS are rallying.
Aside from the government shutdown issues, this week also contains the all-important jobs report. The Street is at an increase of 182k and an unemployment rate of 7.3%. St Louis Fed Head James Bullard raised the possibility of tapering at the October meeting. I think if we have any sort of shutdown, tapering will be off the table until the Dec meeting at the earliest. Of course if there is a shutdown, we won’t be getting any economic data this week.
One potential issue coming down the pike is the fee limit on mortgages starting Jan 1. The cap makes sub $100k loans uneconomic for originators. I wonder how the CFPB will handle the sudden unavailability of loans below 100k. Not sure if they thought this through or they just plan on hitting everyone with fair lending / CRA lawsuits.
Housing equity rose 30% or more than $2 trillion over the past year, according to NAR.
Another interesting data point on the manufacturing renaissance in the US – low value added industries like textiles are onshoring. The problem is finding people.

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