Markets are higher this morning as commodities rally and the UK central bank maintained interest rates. Bonds and MBS are down small.
Mortgage delinquencies were flat at 4.77% in the first quarter, according to the MBA. The foreclosure percentage fell to 1.74% from 1.77%. We are back to pre-crisis levels in delinquencies.
Initial Jobless Claims rose by 20k to 294 last week, the highest level in over a year. We are seeing more and more evidence that the US economy might be slowing a little.
The other evidence of a slowdown? Lousy earnings from the retailers. Macy’s got slammed by 15% yesterday on lousy numbers. Today’s victim is Kohls, down over 7%.
Consumer comfort slipped to 41.7 from 42, according to the Bloomberg Consumer Comfort Index.
Interesting article on the dynamic that is driving long term yields lower: Right now, there is about $9 trillion worth of government bonds out there with negative yields. This is pushing investors to buy longer-dated stuff in order to get a positive yield. Japan recently sold 30 year bonds at a yield of 31.9 basis points, which makes sense given that everything with maturities of 15 years or less is negative. Spain sold 50 year bonds and Italy is exploring a 50 year bond sale. Given the strong US dollar, and the 10 year’s yield of 1.75%, any slowdown in the US economy should result in tremendous demand for US treasuries. Which means low mortgage rates are probably here to stay. Also, it looks like the slowdown in US corporate issuance is over.
Import prices rose 0.3% on a month over month basis, but are down 5.7% year-over-year. Yet another indication that inflation is going nowhere.
Reuters did a poll of economists, and about 1/3 think the Fed will hike rates in June. Traders are handicapping an 8% chance via the Fed Funds futures.
Interesting article on the new hard money lenders in the WSJ. (Behind the paywall unfortunately). They are lending money in the high single digits. There seems to be an arbitrage between underwriting and the box that bank mortgages will fit in. In other words, banks will decline a loan for a technical reason, which makes the loan unsaleable. These people look beyond that and decide if the risk is worth taking. If the rate is 10%, they might be getting compensated for that risk.