Morning Report: US corporations are re-leveraging 4/6/16

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

Mortgage Applications rose 2.7% last week as purchases fell 2.4% and refis rose 6.8%.

We will get the FOMC minutes later today at 2:00 pm EST. Given the big move downward in rates over the past couple of weeks, look for a rebound in rates if the minutes aren’t sufficiently dovish.

Pessimism in the stock market is one of the reasons why it is levitating. Short interest is at an 8 month high. This represents future demand for stocks.

Another negative consequence of ZIRP: companies are more leveraged today than they were during the financial crisis. Many companies have used debt to buy back stock, which doesn’t improve asset quality. That said, the rates on this debt are much lower than they were 10 years ago, which will ease the pain somewhat.

Global bond yields continue to fall. The yield on the Bank of America Global Bond index is 1.3%.

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