Morning Report – We have a deal 10/17/13

Vital Statistics:

Last Change Percent
S&P Futures 1709.5 -3.7 -0.22%
Eurostoxx Index 2998.6 -16.8 -0.56%
Oil (WTI) 101.7 -0.6 -0.59%
LIBOR 0.242 -0.004 -1.63%
US Dollar Index (DXY) 79.83 -0.637 -0.79%
10 Year Govt Bond Yield 2.75% -0.05%
Current Coupon Ginnie Mae TBA 105.7 0.2
Current Coupon Fannie Mae TBA 104.9 0.3
RPX Composite Real Estate Index 200.7 -0.2
BankRate 30 Year Fixed Rate Mortgage 4.31

Buy the rumor, sell the fact. Markets are down small after the government came up with a deal to keep the lights on. Lousy earnings from Goldman aren’t helping things. Bonds are rallying as the Fed is probably on hold for a while.

So the shutdown is over. Democrats won a few month reprieve before we go through this whole process once again. Republicans won a minor concession that the government will try and prevent fraud with obamacare subsidies. We’ll see if this is where the Tea Party finally jumped the shark. I suspect it is.

If you want a deeper dive into this, I discussed this along with a whole host of other issues on Louis Amaya’s Mortgage Markets Today show yesterday. You can hear it here:

http://www.blogtalkradio.com/capitalmarketstoday/2013/10/16/debt-ceiling-explanation-and-implications

Initial Jobless Claims came in at 358k, a drop of 16k, but higher than expectations. It appears California is still working through its computer issues.

It is looking like tomorrow will be the day when we will get all the of the economic reports that have piled up since the shutdown. The biggest of course will be the employment report we were supposed to get two weeks ago. We will also get industrial production, consumer and producer prices, retail sales, inventories, housing starts, amongst other reports. So tomorrow could be market moving in a big way.

Fannie Mae priced a $675 million risk-sharing deal yesterday, the first of its kind. Investors will share in the guarantee fee and will bear some of the credit risk of the underlying mortgages. Given the underlying bonds were all very recent vintages, with very tight underwriting, investors were aggressive in bidding the paper. The senior tranches went for L+200. The mezz tranches went at L+525. This is part of a deal to wean Fannie Mae off the government and to “crowd in” private capital into the mortgage markets.

The Fed released its Beige Book report yesterday. Pithy punch line: Moderately modest.

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