Morning Report – JP Morgan exiting FHA? 7/16/14

Vital Statistics:

Last Change Percent
S&P Futures 1976.4 8.4 0.43%
Eurostoxx Index 3197.4 43.7 1.38%
Oil (WTI) 100.8 0.8 0.79%
LIBOR 0.234 0.001 0.21%
US Dollar Index (DXY) 80.56 0.173 0.22%
10 Year Govt Bond Yield 2.56% 0.01%
Current Coupon Ginnie Mae TBA 106.3 -0.1
Current Coupon Fannie Mae TBA 105.3 0.0
BankRate 30 Year Fixed Rate Mortgage 4.25

Stocks are higher this morning on good numbers out of Apple and Intel, along with news that Fox approached Time Warner for a deal. Bonds and MBS are down.

Mortgage Applications fell 3.6% last week. Purchases were down 7.6% and refis were down .1%. Interestingly, the 30 year fixed rate mortgage increased by a basis point while the 10 year bond yield fell 11 basis points. Not sure what to make of that.

Some disappointing industrial data this morning – Manufacturing production increased .1% versus expectations of a .3% increase and May was revised downward. Capacity Utilization was flat at 79.1%, while the Street was expecting an increase to 79.3%.

Inflation remains relatively tame, although the headline PPI number came in a little hot. On a year-over-year basis inflation at the wholesale level remains under the Fed target. Janet Yellen gave relatively dovish testimony yesterday at Humphrey-Hawkins, which continues today. We will also get the Beige Book this afternoon.

JP Morgan is considering getting out of the FHA business. CEO Jamie Dimon said on the second quarter earnings conference call that the bank lost “a tremendous sum of money on FHA… So the real question is, should we be in the FHA business at all? We are still struggling with that.” Consider this a brush-back pitch to the government, who has been suing the banks left and right (which is one way to impose a financial surtax).

In merger mania, Rupert Murdoch is willing to pay more than $85 a share for Time Warner. Time Warner has rejected the approach. This is probably a function of the Comcast / Time Warner deal, where content providers need more negotiating leverage to deal with new cable giants. I have no idea if this deal will pass regulatory muster, although the story says that Fox is willing to sell CNN to appease antitrust regulators. Never mind the antitrust regulators – an Obama FCC would never allow Rupert Murdoch to own another news outlet. TWX is trading at $82.00 pre-open.

Speaking of mergers, the Administration wants to curb tax inversion deals through new legislation. Interestingly, the proposal would raise $17 billion over the next decade. For the record, in budgetary terms, $1.7 billion a year is peanuts. I guess the Administration must imagine that this is just a way for the government to say it did something, but it knows that there is a corporate work-around. Anyway, there is room for bipartisan agreement on corporate tax reform, but Republicans want to swap lower rates for closing loopholes and Democrats want to close loopholes only.

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