Morning Report: Cracks appearing in the credit markets 11/18/15

Stocks are higher this morning on no real news. Bonds and MBS are down small.

Housing starts fell from a 1.19 million average pace in September to a 1.06 million pace in October. Building Permits rose from 1.1 million to 1.15 million. Multifam starts (which is notoriously volatile) drove the decline.

Mortgage Applications rose 6.2% last week as purchases rose 11.9% and refis rose 2.3%.

We will get the FOMC minutes from the October meeting around 2:00 pm today. Not expecting any big bond market moves from it, but I wouldn’t rule anything out. Here is a rundown on what the Street is looking for.

Investors are starting to balk at the debt issues. The latest one was the financing for the Veritas / Symantec deal. Interestingly, the first indication we had a problem during the financial crisis was a deal-related bond issue that was unsold. Not predicting another 2008, but just be aware.

We are starting to see an increase in consumer credit defaults. Auto loan financing has gotten absolutely ridiculous, with companies offering 8 year car loans at 30 year fixed rate mortgage interest rates. Yet another unintended consequence of ZIRP. You can’t blame consumers for taking the money – eventually all of this central bank money printing will make its way into the inflation numbers.

FHA is trying to ease rules to financing condos. Affordable housing advocates have been pushing for these changes.. Separately, Obama has threatened to veto legislation that would increase lender protections for non-QM loans. Guess FHA lending is going nowhere as the leader in low – income / low downpayment financing.

Actually, the Islamic State IS “Islamic” 11/18/15

Turns out the official line about the ISIS as proclaimed by our President (you will recall the blanket statements – not Islamic, and AQ’s junior partner) were as ignorant in their dismissiveness as they were dangerous in their denial.  This excellent Atlantic article spells out what we actually know about these militant medieval religious zealots, their appeal, and their goals.

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