Morning Report: The Bank of England cuts rates, sending Treasuries higher 8/4/16

Posted on August 4, 2016 by Brent Nyitray

Vital Statistics:

Last Change
S&P Futures 2160.0 3.0
Eurostoxx Index 336.9 1.0
Oil (WTI) 40.8 0.0
US dollar index 86.5 -0.5
10 Year Govt Bond Yield 1.51%
Current Coupon Fannie Mae TBA 103.3
Current Coupon Ginnie Mae TBA 104.2
30 Year Fixed Rate Mortgage 3.5

Stocks are higher this morning after the Bank of England cut rates and instituted QE. Bonds and MBS are up.

In response to Brexit, the Bank of England cut rates and introduced a bond-buying program for corporate and sovereign debt. This is causing global sovereigns to rally, and the German Bund is now trading at -7 basis points again. The US 10-year seems to correlate the most with the German Bund lately, so if it continues to rally, look for lower rates in the US.

Job cuts increased in July to 45,346, which is up 19% from last month, but is down 57% from a year ago. Military discharges and continued cuts in the energy sector drove the increase. Texas and California bore the brunt of the job cuts.

Initial Jobless Claims ticked up to 269k last week, however we have been below 300k for months, which is a very low level.

The Bloomberg Consumer Comfort index ticked up slightly last week to 43 from 42.9.

Factory Orders fell 1.5% from a downward-revised -1.2% in May. The manufacturing sector continues to exhibit a slowdown.

The ISM Services Index ticked down to 55.5 from 56.5 last month. The ISM Services index has been much stronger than the manufacturing index.

Nationstar reported better than expected earnings in the second quarter, although they took a big hit on their servicing portfolio. That said, while others are running from the servicing business, Nationstar is doubling down, and looks to build their business, with the addition of Seneca and USAA as clients. USAA had used Dovenmuhle in the past. Originations were up 24% QOQ and consumer direct accounted for 60% of the volume. Nationstar was up 12% for the day and is the highest in 9 months.

Mortgage REIT Annaly Capital reported a drop in book value per share as volatility hurt results. Given the widening of MBS spreads at the end of the second quarter, this is to be expected, although peer American Capital Agency did report a small increase. Annaly just completed its acquisition of Hatteras. Aside from the Fed, mortgage REITs are some of the biggest purchasers of mortgage backed securities, and can move around TBAs which influences mortgage rates, so it pays to keep tabs on how they are doing.

Separately, Fannie Mae reported a drop in net income.

Filed under: Economy, Morning Report |

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8 Responses

  1. Let the mutherfuker burn!, on August 4, 2016 at 11:39 am said:

    Seems to be an odd choice for a unabashed gun grabber.

    There is a strong argument to be made that convictions for felon/firearm violations are way down federally and statewise, particularly in blue states. If they were serious about gun control and reducing gun violence why not grab the low hanging fruit?

    http://hotair.com/archives/2016/08/04/barack-obama-commutes-the-sentences-of-more-than-fifty-felons-with-firearms-violations/

    But we know he’s not really serious though.

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  2. jnc4p, on August 4, 2016 at 1:00 pm said:

    Worth a note – One employee wearing objectionable political clothing at work constitutes harassment towards employees who disagree with it that the employer is liable for.

    “Recall that this is not a case about when private employers may restrict what their employees wear on the job, or even about when government employers may do so. Private employers have very broad power on this, because they aren’t bound by the First Amendment (though statutes in some states may constrain employers’ power to some extent). Government employers also have fairly broad power to restrict their employees’ on-the-job speech and behavior.

    Instead, this is a case about the rules that all employers, public or private, must follow, on pain of massive legal liability. The harassment law rules (which, as I noted, are the same for private employers as for the federal government) are imposed by the government acting as sovereign — the area where the First Amendment should provide the most protection — not just the government acting as employer.”

    https://www.washingtonpost.com/news/volokh-conspiracy/wp/2016/08/03/wearing-dont-tread-on-me-insignia-could-be-punishable-racial-harassment/

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    • ScottC, on August 4, 2016 at 1:27 pm said:

      jnc:

      One employee wearing objectionable political clothing at work constitutes harassment towards employees who disagree with it that the employer is liable for.

      This is interesting news. The guy who sits next to me on the desk is huge liberal. (He is a walking, talking cliche of the limousine liberal). His wife is a big activist and donor for the Dems, and back when Obama first ran she went to a fundraiser and got her picture taken with Obama. Knowing my own political inclinations, he put the picture on his desk, facing me, just to irritate me, which is where it has been since 2008. I have refrained from drawing a mustache on his wife in the picture, but perhaps I have my own harassment suit in the making?

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      • jnc4p, on August 4, 2016 at 1:28 pm said:

        File the complaint and cite the EEOC ruling.

        If these are the new rules, then make them live by them.

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      • Brent Nyitray, on August 4, 2016 at 3:30 pm said:

        Does your friend mind being scapegoated for all the problems in the world by obama? Does he mind the regulatory overreach that probably affects his P/L?

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        • ScottC, on August 4, 2016 at 8:40 pm said:

          Brent:

          Does your friend mind being scapegoated for all the problems in the world by obama? Does he mind the regulatory overreach that probably affects his P/L?

          Not really. He does rail on about the regulations that are killing our business, but then he will cheer on the very people who impose them when they appear on CNBC. He is a bundle of internal contradictions and incoherence. I have no idea how he doesn’t implode from cognitive dissonance. He is constantly disparaging “rich white guys”, but he is (without exaggeration) the richest white guy in the office. House in Manhattan, mansion in South Hampton, partying with the beautiful people, etc. Like I said, the term limousine liberal was invented for him.

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    • novahockey, on August 4, 2016 at 2:59 pm said:

      [moves readiness to DEFCON 3. looks into writing a check to Trump, D.]

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  3. jnc4p, on August 4, 2016 at 1:30 pm said:

    Any way to replace Trump with Eastwood?

    “ESQ: Politically, you’re the Anti-Pussy party?

    SE: That’s right. No candy-asses.

    CE: Yeah, I’m anti–the pussy generation.”

    http://www.esquire.com/entertainment/a46893/double-trouble-clint-and-scott-eastwood/

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Be kind, show respect, and all will be right with the world.